UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
Investment Company Act File Number: 811-01884
Endowments
(Exact name of registrant as specified in charter)
P.O. Box 7650, One Market, Steuart Tower
San Francisco, California 94120
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 421-9360
Date of fiscal year end: July 31
Date of reporting period: July 31, 2007
Patrick F. Quan
Capital Research and Management Company
P.O. Box 7650, One Market, Steuart Tower
San Francisco, California 94120
(Name and address of agent for service)
Copies to:
Mitchell E. Nichter
Paul, Hastings, Janofsky & Walker LLP
55 Second Street
Twenty-Fourth Floor
San Francisco, California 94105
(Counsel for the registrant)
ITEM 1 – Reports to Stockholders
[logo - Capital Research and ManagementSM]
Endowments
Investments for nonprofit institutions
Annual report for the year ended July 31, 2007
EndowmentsSM
Endowments is managed by Capital Research and Management Company,SM which also manages the 30 American Funds.® American Funds ranks among the nation’s three largest mutual fund families. For 75 years, Capital Research has invested with a long-term focus based on thorough research and attention to risk.
Growth and Income Portfolio seeks to provide long-term growth of principal, with income and preservation of capital as secondary objectives, primarily through investments in common stocks.
Bond Portfolio seeks to provide as high a level of current income as is consistent with the preservation of capital through investments in fixed-income securities.
Figures shown in this report are past results and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity. For current information and month-end results, visit americanfunds.com/endowments.
| Here are returns on a $1,000 investment with all distributions reinvested for periods ended June 30, 2007 (the most recent calendar quarter): | ||||||||||||
| 1 year | 5 years | 10 years | ||||||||||
| Growth and Income Portfolio | ||||||||||||
| Average annual total return | — | +9.88 | % | +9.34 | % | |||||||
| Cumulative total return | +19.18 | % | +60.17 | % | +144.33 | % | ||||||
| Bond Portfolio | ||||||||||||
| Average annual total return | — | +5.58 | % | +5.98 | % | |||||||
| Cumulative total return | +6.14 | % | +31.20 | % | +78.75 | % | ||||||
The total annual fund operating expense ratios for Growth and Income Portfolio and Bond Portfolio were .69% and .76%, respectively, as of the most recent fiscal year-end. These figures do not reflect any fee waivers currently in effect; therefore, the actual expense ratios are lower.
The funds’ investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased it to 10% on April 1, 2005. Fund results shown reflect actual expenses, with the waiver applied. Fund results would have been lower without the waiver. Please see the Financial Highlights tables on page 18 for details.
Bond Portfolio’s 30-day yield as of August 31, 2007, calculated in accordance with the Securities and Exchange Commission formula, was 5.34% (5.29% without the fee waiver).
The return of principal in the Bond Portfolio is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bonds owned by the fund.
[Begin Sidebar]
Results at a glance | ||||||||
| (for full fiscal years ending 7/31/76–7/31/07) | ||||||||
| Growth and Income Portfolio | Bond Portfolio | |||||||
| 1976 | +27.7 | % | +12.1 | % | ||||
| 1977 | +6.4 | +12.6 | ||||||
| 1978 | +10.4 | +0.7 | ||||||
| 1979 | +10.1 | +7.0 | ||||||
| 1980 | +17.2 | +3.6 | ||||||
| 1981 | +15.3 | +4.5 | ||||||
| 1982 | +3.8 | +18.4 | ||||||
| 1983 | +56.0 | +23.9 | ||||||
| 1984 | +0.4 | +7.9 | ||||||
| 1985 | +30.5 | +20.6 | ||||||
| 1986 | +25.4 | +21.0 | ||||||
| 1987 | +20.2 | +4.4 | ||||||
| 1988 | +2.4 | +8.6 | ||||||
| 1989 | +23.2 | +13.7 | ||||||
| 1990 | +4.1 | +6.9 | ||||||
| 1991 | +15.0 | +10.8 | ||||||
| 1992 | +15.7 | +18.7 | ||||||
| 1993 | +10.0 | +11.7 | ||||||
| 1994 | +2.8 | +1.4 | ||||||
| 1995 | +18.6 | +8.0 | ||||||
| 1996 | +13.2 | +6.3 | ||||||
| 1997 | +38.4 | +10.8 | ||||||
| 1998 | +9.1 | +6.7 | ||||||
| 1999 | +18.2 | +1.7 | ||||||
| 2000 | +3.3 | +5.1 | ||||||
| 2001 | +18.2 | +12.7 | ||||||
| 2002 | +8.6 | +2.8 | ||||||
| 2003 | +10.2 | +10.6 | ||||||
| 2004 | +13.8 | +6.4 | ||||||
| 2005 | +10.3 | +5.1 | ||||||
| 2006 | +4.6 | +1.9 | ||||||
| 2007 | +16.0 | +4.8 | ||||||
| Average annual | ||||||||
| total return* | +13.1 | % | +8.5 | % | ||||
| *From July 26, 1975, when Capital Research and Management Company became the investment adviser of the funds’ assets, through July 31, 2007. | ||||||||
| Results show total returns measuring capital appreciation and income return, assuming reinvestment of dividends and capital gain distributions. | ||||||||
[End Sidebar]
Dear shareholders:
We are pleased to report to you at the close of our 2007 fiscal year.
Growth and Income Portfolio
For the 12 months ended July 31, 2007, the value of an investment in the Growth and Income Portfolio rose 16.0%.* Over the same period, the unmanaged Standard & Poor’s 500 Composite Index gained 16.1% and the Lipper Growth & Income Funds Index rose 15.2%.
*All percentage gain/loss figures used throughout this letter include reinvestment of distributions.
In many respects, economic trends of the previous year continued during the 12 months ended July 31, 2007. While the price of oil remained high, the nation’s real gross domestic product continued to expand, growing nearly 2% during the fiscal year.
With a healthy economy, the last 12 months were a rewarding period for equity investors as high corporate profit margins translated into solid gains in earnings and cash flow. This resulted in good dividend growth and significant share buybacks. Looking forward, the weak housing environment and deteriorating credit market could slow economic growth and test the ability of corporations to sustain their high profit margins.
During the year, the fund’s investment professionals continued to invest in large, well-established firms. We believe these companies offer value and opportunities for growth. We noted last year that these stocks had not helped our relative results in the prior two years. That changed in recent months, however, as the stocks gained strength and added to the portfolio’s return.
Within the portfolio, our largest sector remains information technology, where many companies continue to offer investors good growth prospects at reasonable valuations. We increased our exposure in this sector from 15.4% to 20.3% during the year. Our exposure to industrial stocks also increased from 6.5% to 9.9%. Reflecting our increasing concern about the financial area, we reduced our investments in this sector to 10.2% from 11.7% a year ago.
As noted, many large-capitalization stocks contributed positively to the fund’s return. This was especially true in information technology where several stocks did very well. Reflecting high oil prices, our energy stocks also made a strong showing. The dollar’s weakness, as well as robust growth outside the U.S., resulted in many non-U.S. holdings achieving favorable returns. On the other side of the ledger, we would have done better had we owned fewer stocks in the financial area. This area, in particular our banking investments, did poorly.
The percentage of assets invested in equities was just under 88% at July 31, up slightly from 86% at the beginning of the fiscal year. The remainder was held in interest-bearing cash equivalents.
Bond Portfolio
For the twelve months ended July 31, 2007, the Bond Portfolio posted a total return of 4.8%, essentially matching the Lipper Corporate Debt A-Rated Bond Funds Average. Over the same period, the unmanaged Lehman Brothers Aggregate Bond Index gained 5.6%.
The U.S. bond market enjoyed a period of relative strength during the first nine months of the recent fiscal year. Bond yields trended lower as investors anticipated slower economic growth and a reduction in the federal funds rate in 2007. Indeed, strong growth during the last half of 2006 was followed by sluggish momentum in early 2007, while ongoing weakness in the housing market fanned concerns about the durability of consumer spending.
These early gains, however, were largely erased amid market volatility during the final three months of the fiscal year. Bond yields rose sharply in May and June as expectations for a rate cut faded. New economic data pointed toward resilience in the broader economy, even as the housing market continued to weaken. Risk premiums widened — especially for lower rated corporate debt and financial institutions — and credit conditions tightened. Credit conditions worsened in July, prompting a flight to quality that once again sent Treasury yields lower. As a result, benchmark Treasury yields ended the year lower than where they began, while risk premiums for other debt classes were generally wider.
Overall, long-term bonds generally produced better returns than did short- and intermediate-term bonds, as gains logged early in the fiscal year provided a cushion against the late-period downturn. In the investment-grade universe, which is where the Bond Portfolio invests, AAA-rated and BBB-rated bonds (the top and bottom categories) delivered higher returns than did the middle rating categories.
Changes in market conditions prompted changes in the Bond Portfolio during the 12 months. The fund reduced its exposure to corporate bonds, from 46.4% of assets at the start of the year to 38.6% by the close. Additionally, the fund increased its exposure to mortgage- and asset-backed obligations, from 23.3% to 27.9%. U.S. government and agency securities (15.5% of assets) increased slightly, year over year.
At fiscal year-end, the fund held 93% of net assets in fixed-income securities with maturities longer than one year — a slight increase from our last report. The remainder was held in interest-bearing cash equivalents.
Cordially,
/s/ Robert G. O’Donnell
Robert G. O’Donnell
Vice Chairman of the Board and Principal Executive Officer
/s/ John H. Smet
John H. Smet
President
September 6, 2007
For current information about the fund, visit americanfunds.com/endowments.
The value of a long-term perspective
Growth of a $50,000 investment under Capital Research and Management Company’s stewardship, 7/26/75–7/31/07.
Figures shown in this report are past results and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com/endowments.
Growth and Income Portfolio
Average annual total returns based | ||||
on a $1,000 investment | ||||
| (for periods ended July 31, 2007)* | ||||
| Lifetime | +13.1 | %1 | ||
| 10 years | +8.5 | |||
| 5 years | +10.9 | |||
| 1 year | +16.0 | |||
*Assumes reinvestment of all distributions. | ||||
[begin mountain chart]
| Year ended | Growth and Income Portfolio | Lipper Growth & Income Funds Index | Standard & Poor’s 500 Composite Index with dividends reinvested | |||||||||
| 07/25/75 | $ | 50,000 | $ | 50,000 | $ | 50,000 | ||||||
| 07/31/75 | 49,770 | 50,000 | 49,871 | |||||||||
| 07/31/76 | 63,476 | 60,735 | 60,467 | |||||||||
| 07/31/77 | 67,590 | 62,434 | 60,350 | |||||||||
| 07/31/78 | 74,525 | 69,272 | 64,777 | |||||||||
| 07/31/79 | 82,131 | 77,106 | 70,508 | |||||||||
| 07/31/80 | 96,277 | 95,121 | 87,260 | |||||||||
| 07/31/81 | 110,942 | 108,452 | 98,601 | |||||||||
| 07/31/82 | 106,860 | 98,876 | 85,511 | |||||||||
| 07/31/83 | 166,726 | 154,488 | 136,183 | |||||||||
| 07/31/84 | 166,164 | 146,807 | 132,141 | |||||||||
| 07/31/85 | 216,743 | 193,372 | 174,975 | |||||||||
| 07/31/86 | 272,165 | 243,630 | 224,681 | |||||||||
| 07/31/87 | 326,898 | 319,222 | 312,963 | |||||||||
| 07/31/88 | 319,361 | 296,921 | 276,178 | |||||||||
| 07/31/89 | 393,517 | 375,359 | 364,261 | |||||||||
| 07/31/90 | 409,757 | 381,311 | 387,824 | |||||||||
| 07/31/91 | 471,346 | 423,790 | 437,201 | |||||||||
| 07/31/92 | 545,557 | 476,028 | 493,020 | |||||||||
| 07/31/93 | 600,375 | 539,269 | 535,967 | |||||||||
| 07/31/94 | 617,007 | 572,677 | 563,582 | |||||||||
| 07/31/95 | 731,592 | 688,356 | 710,508 | |||||||||
| 07/31/96 | 828,273 | 778,692 | 828,122 | |||||||||
| 07/31/97 | 1,146,319 | 1,122,337 | 1,259,661 | |||||||||
| 07/31/98 | 1,250,106 | 1,247,665 | 1,502,488 | |||||||||
| 07/31/99 | 1,477,738 | 1,410,710 | 1,806,129 | |||||||||
| 07/31/00 | 1,428,818 | 1,438,119 | 1,968,146 | |||||||||
| 07/31/01 | 1,689,291 | 1,407,164 | 1,686,257 | |||||||||
| 07/31/02 | 1,544,010 | 1,138,044 | 1,288,040 | |||||||||
| 07/31/03 | 1,701,152 | 1,244,809 | 1,425,050 | |||||||||
| 07/31/04 | 1,936,007 | 1,420,204 | 1,612,612 | |||||||||
| 07/31/05 | 2,136,028 | 1,640,110 | 1,839,094 | |||||||||
| 07/31/06 | 2,234,591 | 1,761,639 | 1,937,955 | |||||||||
| 07/31/07 | 2,592,587 | 2,030,206 | 2,250,444 | |||||||||
Bond Portfolio
Average annual total returns based | ||||
on a $1,000 investment | ||||
| (for periods ended July 31, 2007)* | ||||
| Lifetime | +8.5 | %1 | ||
| 10 years | +5.7 | |||
| 5 years | +5.7 | |||
| 1 year | +4.8 | |||
*Assumes reinvestment of all distributions. | ||||
[begin mountain chart]
| Year ended | Bond Portfolio | Lipper A-Rated Bond Funds Index3 | Lehman Brothers Aggregate Bond Index3 | |||||||||
| 07/25/75 | $ | 50,000 | $ | 50,000 | $ | 50,000 | ||||||
| 07/31/75 | 50,064 | 50,000 | 50,000 | |||||||||
| 07/31/76 | 56,123 | 57,578 | 56,105 | |||||||||
| 07/31/77 | 63,169 | 64,446 | 62,334 | |||||||||
| 07/31/78 | 63,633 | 65,992 | 63,680 | |||||||||
| 07/31/79 | 68,078 | 70,210 | 67,930 | |||||||||
| 07/31/80 | 70,604 | 70,659 | 69,012 | |||||||||
| 07/31/81 | 67,372 | 66,985 | 65,554 | |||||||||
| 07/31/82 | 79,771 | 79,063 | 79,021 | |||||||||
| 07/31/83 | 98,881 | 98,844 | 96,331 | |||||||||
| 07/31/84 | 106,746 | 105,442 | 104,703 | |||||||||
| 07/31/85 | 128,775 | 130,480 | 129,741 | |||||||||
| 07/31/86 | 155,776 | 156,163 | 157,625 | |||||||||
| 07/31/87 | 162,649 | 162,434 | 164,746 | |||||||||
| 07/31/88 | 176,667 | 174,776 | 177,215 | |||||||||
| 07/31/89 | 200,841 | 200,501 | 204,164 | |||||||||
| 07/31/90 | 214,609 | 210,832 | 218,597 | |||||||||
| 07/31/91 | 237,739 | 231,705 | 241,994 | |||||||||
| 07/31/92 | 282,164 | 270,025 | 277,755 | |||||||||
| 07/31/93 | 315,292 | 300,822 | 305,993 | |||||||||
| 07/31/94 | 310,743 | 297,037 | 306,282 | |||||||||
| 07/31/95 | 335,522 | 326,853 | 337,244 | |||||||||
| 07/31/96 | 356,493 | 343,628 | 355,926 | |||||||||
| 07/31/97 | 395,089 | 383,070 | 394,231 | |||||||||
| 07/31/98 | 421,544 | 411,045 | 425,252 | |||||||||
| 07/31/99 | 428,913 | 414,065 | 435,839 | |||||||||
| 07/31/00 | 450,928 | 432,980 | 461,838 | |||||||||
| 07/31/01 | 508,076 | 486,326 | 520,453 | |||||||||
| 07/31/02 | 522,431 | 511,463 | 559,661 | |||||||||
| 07/31/03 | 578,001 | 542,538 | 589,979 | |||||||||
| 07/31/04 | 614,794 | 569,562 | 618,527 | |||||||||
| 07/31/05 | 645,989 | 600,016 | 648,161 | |||||||||
| 07/31/06 | 658,520 | 604,820 | 657,616 | |||||||||
| 07/31/07 | 690,183 | 635,497 | 694,301 | |||||||||
1 | From 7/26/75, when Capital Research and Management Company became the investment adviser, through 7/31/07. |
2 | The share value dipped below the $50,000 mark briefly in fiscal 1975 and 1976. |
3 | Lehman Brothers Aggregate Bond Index and Lipper A-Rated Bond Funds Index did not exist until 12/31/75. For the period from 7/31/75 to 12/31/75, the Lehman Brothers Government/Credit Bond Index was used. |
| All results calculated with dividends and capital gains reinvested. |
| Sales charges do not apply to the Growth and Income Portfolio or the Bond Portfolio. |
| The market indexes are unmanaged. |
| The results shown are before taxes on fund distributions and sale of fund shares. |
Summary investment portfolio
The following summary investment portfolio is designed to streamline the report and help investors better focus on a fund's principal holdings. For details on how to obtain a complete schedule of portfolio holdings, please see the back cover.
Growth and Income Portfolio July 31, 2007
[pie chart]
| Industry sector diversification | ||||
| Information technology | 20.26 | % | ||
| Consumer staples | 14.00 | |||
| Health care | 11.75 | |||
| Financials | 10.24 | |||
| Industrials | 9.92 | |||
| Energy | 8.62 | |||
| Consumer discretionary | 8.15 | |||
| Telecommunication services | 1.90 | |||
| Materials | 1.90 | |||
| Miscellaneous | 0.82 | |||
| Short-term securities & other assets less liabilities | 12.44 |
[end pie chart]
Common stocks - 87.56% | Shares | Market value | Percent of net assets |
Information technology - 20.26% | |||
| Microsoft Corp. | 143,000 | $ 4,145,570 | 3.49% |
| Nokia Corp. (ADR) | 130,000 | 3,723,200 | 3.13 |
| Oracle Corp. (1) | 147,000 | 2,810,640 | 2.37 |
| International Business Machines Corp. | 20,000 | 2,213,000 | 1.86 |
| Cisco Systems, Inc. (1) | 68,000 | 1,965,880 | 1.66 |
| Intel Corp. | 80,000 | 1,889,600 | 1.59 |
| QUALCOMM Inc. | 30,000 | 1,249,500 | 1.05 |
| Google Inc., Class A (1) | 2,200 | 1,122,000 | .94 |
| Motorola, Inc. | 62,000 | 1,053,380 | .89 |
| Hewlett-Packard Co. | 15,000 | 690,450 | .58 |
| Other securities | 3,203,510 | 2.70 | |
| 24,066,730 | 20.26 | ||
Consumer staples - 14.00% | |||
| Wal-Mart Stores, Inc. | 75,000 | 3,446,250 | 2.90 |
| Altria Group, Inc. | 46,500 | 3,090,855 | 2.60 |
| PepsiCo, Inc. | 32,000 | 2,099,840 | 1.77 |
| Walgreen Co. | 43,000 | 1,899,740 | 1.60 |
| Bunge Ltd. | 14,000 | 1,268,540 | 1.07 |
| L'Oréal SA (2) | 10,000 | 1,143,868 | .96 |
| Coca-Cola Co. | 20,000 | 1,042,200 | .88 |
| Other securities | 2,635,955 | 2.22 | |
| 16,627,248 | 14.00 | ||
Health care - 11.75% | |||
| Medtronic, Inc. | 45,000 | 2,280,150 | 1.92 |
| Eli Lilly and Co. | 30,000 | 1,622,700 | 1.37 |
| Novo Nordisk A/S, Class B (2) | 15,000 | 1,580,802 | 1.33 |
| Roche Holding AG (2) | 8,000 | 1,414,842 | 1.19 |
| Pfizer Inc | 55,000 | 1,293,050 | 1.09 |
| Merck & Co., Inc. | 25,000 | 1,241,250 | 1.04 |
| Johnson & Johnson | 20,000 | 1,210,000 | 1.02 |
| Other securities | 3,316,240 | 2.79 | |
| 13,959,034 | 11.75 | ||
Financials - 10.24% | |||
| Berkshire Hathaway Inc., Class A (1) | 20 | 2,200,000 | 1.85 |
| Fannie Mae | 36,000 | 2,154,240 | 1.81 |
| Wells Fargo & Co. | 60,000 | 2,026,200 | 1.71 |
| American International Group, Inc. | 19,000 | 1,219,420 | 1.03 |
| Wachovia Corp. | 22,000 | 1,038,620 | .88 |
| Citigroup Inc. | 20,000 | 931,400 | .78 |
| Other securities | 2,589,840 | 2.18 | |
| 12,159,720 | 10.24 | ||
Industrials - 9.92% | |||
| General Electric Co. | 76,000 | 2,945,760 | 2.48 |
| United Parcel Service, Inc., Class B | 29,000 | 2,195,880 | 1.85 |
| Caterpillar Inc. | 20,000 | 1,576,000 | 1.33 |
| Northrop Grumman Corp. | 15,000 | 1,141,500 | .96 |
| Other securities | 3,929,250 | 3.30 | |
| 11,788,390 | 9.92 | ||
Energy - 8.62% | |||
| Exxon Mobil Corp. | 44,000 | 3,745,720 | 3.15 |
| Chevron Corp. | 24,000 | 2,046,240 | 1.72 |
| Schlumberger Ltd. | 20,000 | 1,894,400 | 1.59 |
| ConocoPhillips | 23,000 | 1,859,320 | 1.57 |
| Other securities | 698,310 | .59 | |
| 10,243,990 | 8.62 | ||
Consumer discretionary - 8.15% | |||
| Target Corp. | 30,000 | 1,817,100 | 1.53 |
| Time Warner Inc. | 80,000 | 1,540,800 | 1.30 |
| Lowe's Companies, Inc. | 54,000 | 1,512,540 | 1.27 |
| Walt Disney Co. | 30,000 | 990,000 | .83 |
| Other securities | 3,818,078 | 3.22 | |
| 9,678,518 | 8.15 | ||
Telecommunication services - 1.90% | |||
| Verizon Communications Inc. | 25,000 | 1,065,500 | .90 |
| Other securities | 1,195,001 | 1.00 | |
| 2,260,501 | 1.90 | ||
Materials - 1.90% | |||
| Air Products and Chemicals, Inc. | 13,000 | 1,122,810 | .95 |
| Other securities | 1,129,050 | .95 | |
| 2,251,860 | 1.90 | ||
Miscellaneous - 0.82% | |||
| Other common stocks in initial period of acquisition | 967,681 | .82 | |
Total common stocks (cost: $80,840,433) | 104,003,672 | 87.56 | |
Short-term securities - 13.26% | Principal amount (000) | Market Value | Percent of net assets |
| Procter & Gamble International Funding S.C.A. 5.22% due 8/1/2007 (3) | $ 2,300 | $ 2,299,665 | 1.94 |
| Prudential Funding, LLC 5.25% due 8/10/2007 | 1,150 | 1,148,322 | .97 |
| Paccar Financial Corp. 5.22% due 8/17/2007 | 1,100 | 1,097,286 | .92 |
| United Parcel Service, Inc. 5.22% due 8/31/2007 (3) | 1,100 | 1,095,055 | .92 |
| CAFCO, LLC 5.27% due 9/12/2007 (3) | 1,100 | 1,093,076 | .92 |
| Hewlett-Packard Co. 5.25% due 8/2/2007 (3) | 1,000 | 999,708 | .84 |
| Emerson Electric Co. 5.22% due 8/7/2007 (3) | 1,000 | 998,984 | .84 |
| Triple-A One Funding Corp. 5.26% due 8/9/2007 (3) | 1,000 | 998,683 | .84 |
| Variable Funding Capital Corp. 5.265% due 8/8/2007 (3) | 900 | 898,945 | .76 |
| Coca-Cola Co. 5.23% due 9/20/2007 (3) | 805 | 799,033 | .67 |
| Other securities | 4,326,370 | 3.64 | |
Total short-term securities (cost: $15,755,127) | 15,755,127 | 13.26 | |
Total investment securities (cost: $96,595,560) | 119,758,799 | 100.82 | |
| Other assets less liabilities | (978,300) | (.82) | |
Net assets | $118,780,499 | 100.00% | |
| "Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed. | |||
| "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio. | |||
| The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item. | |||
| (1) Security did not produce income during the last 12 months. | |||
| (2) Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in "Miscellaneous" and "Other Securities", was $6,031,571. | |||
| (3) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. In practice, restricted securities in this fund are typically as liquid as unrestricted securities. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $13,509,519, which represented 11.37% of the net assets of the fund. | |||
| The industry classifications shown in the summary investment portfoli were obtained from sources believed to be reliable and are not covered by the Report of Independent Registered Public Accounting Firm. | |||
| ADR = American Depositary Receipts | |||
| See Notes to Financial Statements | |||
Summary investment portfolio
The following summary investment portfolio is designed to streamline the report and help investors better focus on a fund's principal holdings. For details on how to obtain a complete schedule of portfolio holdings, please see the back cover.
Bond Portfolio July 31, 2007
[pie chart]
| Holdings by inevestment type | ||||
Corporate bonds & notes | 38.61 | % | ||
| Financials | 20.40 | |||
| Consumer Discretionary | 4.42 | |||
| Telecommunication Services | 3.62 | |||
| Industrials | 3.54 | |||
| Utilities | 3.42 | |||
| Energy | 1.09 | |||
| Health Care | 1.04 | |||
| Other corporate bonds & notes | 1.08 | |||
| Mortgage- and Asset-backed Obligations | 27.88 | |||
| U.S. Government & Government Agency Bonds & Notes | 15.45 | |||
| Other | 1.71 | |||
| Preferred securities | 9.07 | |||
| Short-term securities & other assets less liabilities | 7.28 |
[end pie chart]
Bonds & notes - 83.64% | Principal amount (000) | Market Value | Percent of net assets |
Corporate bonds & notes - 38.61% | |||
Financials - 20.40% | |||
| Residential Capital Corp.: | |||
| 6.46 2009 (1) | $500 | $470,039 | |
| 6.50 2013 | 350 | 314,443 | |
| General Motors Acceptance Corp.: | |||
| 7.25 2011 | 455 | 431,507 | |
| 7.56 2014 (1) | 250 | 232,966 | 2.42 |
| Washington Mutual, Inc. 5.66 2012 (1) | 650 | 643,233 | |
| Washington Mutual Preferred Funding I Ltd., Series A-1, 6.534 (undated) (1) (2) | 400 | 373,788 | |
| Washington Mutual Preferred Funding II Ltd. 6.665 (undated) (1) (2) | 300 | 267,567 | 2.15 |
| Ford Motor Credit Co.: | |||
| 7.875 2010 | 650 | 621,971 | |
| 7.375 2009 | 150 | 144,885 | 1.28 |
| AIG SunAmerica Global Financing VII 5.85 2008 (2) | 125 | 125,618 | |
| American General Finance Corp., Series I, 5.40 2015 | 250 | 240,861 | |
| ILFC E-Capital Trust II 6.25 2065 (1) (2) | 255 | 246,141 | |
| American International Group, Inc., Series A-1, 6.25 2087 (1) | 125 | 115,514 | 1.22 |
| Hospitality Properties Trust: | |||
| 6.30 2016 | 400 | 404,083 | |
| 6.75 2013 | 215 | 222,468 | 1.04 |
| Development Bank of Singapore Ltd. 7.875 2009 (2) | 250 | 261,694 | |
| DBS Bank Ltd. 5.97 2021 (1) (2) | 250 | 254,788 | .86 |
| TuranAlem Finance BV 8.50 2015 (2) | 400 | 366,000 | .61 |
| Lincoln National Corp. 7.00 2066 (1) | 425 | 427,732 | .72 |
| SocGen Real Estate Co. LLC, Series A, 7.64 (undated) (1) (2) | 375 | 376,297 | .63 |
| Standard Chartered PLC 6.409 (undated)(1) (2) | 400 | 365,678 | .61 |
| Resona Bank, Ltd. 5.85 (undated) (1) (2) | 375 | 356,629 | .60 |
| Santander Issuances, SA Unipersonal 5.805 2016 (1) (2) | 100 | 101,126 | |
| Abbey National PLC 6.70 (undated) (1) | 250 | 252,521 | .59 |
| Prudential Holdings, LLC, Series C, 8.695 2023 (2) (3) | 150 | 184,803 | .31 |
| BNP Paribas 7.195 (undated) (1) (2) | 100 | 99,213 | .17 |
| Other securities | 4,301,531 | 7.19 | |
| 12,203,096 | 20.40 | ||
Consumer discretionary - 4.42% | |||
| Federated Retail Holdings, Inc.: | |||
| 5.35 2012 | 400 | 397,636 | |
| 5.90 2016 | 300 | 290,678 | 1.15 |
| DaimlerChrysler North America Holding Corp. 8.00 2010 | 600 | 636,814 | 1.07 |
| Other securities | 1,315,831 | 2.20 | |
| 2,640,959 | 4.42 | ||
Telecommunication services - 3.62% | |||
| AT&T Wireless Services, Inc.: | |||
| 8.125 2012 | 500 | 551,309 | |
| 7.875 2011 | 100 | 107,588 | |
| SBC Communications Inc. 5.625-6.25 2011-2016 | 500 | 497,788 | 1.94 |
| Other securities | 1,006,664 | 1.68 | |
| 2,163,349 | 3.62 | ||
Industrials - 3.54% | |||
| Continental Airlines, Inc., Series 2001-1, Class A-2, 6.503 2011 | 385 | 388,431 | .65 |
| BAE SYSTEMS 2001 Asset Trust, Series 2001, Class G, MBIA insured, 6.664 2013 (2) (3) | 313 | 329,018 | .55 |
| Other securities | 1,402,217 | 2.34 | |
| 2,119,666 | 3.54 | ||
Utilities - 3.42% | |||
| Homer City Funding LLC 8.734 2026 (3) | 292 | 319,877 | .54 |
| Other securities | 1,723,006 | 2.88 | |
| 2,042,883 | 3.42 | ||
Energy - 1.09% | |||
| Tengizchevroil Finance Co. S.àr.l., Series A, 6.124 2014 (2) (3) | 300 | 294,000 | .49 |
| Other securities | 357,021 | .60 | |
| 651,021 | 1.09 | ||
Materials - 0.65% | |||
| Alcoa Inc. 5.55 2017 | 300 | 290,229 | .49 |
| Other securities | 98,784 | .16 | |
| 389,013 | .65 | ||
Health care - 1.04% | |||
| Other securities | 620,272 | 1.04 | |
Other corporate bonds & notes - 0.43% | |||
| Other securities | 257,826 | .43 | |
Total corporate bonds & notes | 23,088,085 | 38.61 | |
Mortgage- and asset-backed obligations (3) - 27.88% | |||
| Fannie Mae: | |||
| Series 2000-T5, Class B, 7.30 2010 | 500 | 526,108 | |
| 4.50 2020 | 461 | 440,263 | |
| 6.00 2027 | 862 | 859,290 | |
| 5.50 2036 | 419 | 404,984 | |
| 4.50-11.96 2011-2041 (1) | 920 | 915,567 | 5.26 |
| Freddie Mac: | |||
| 6.00 2026 | 536 | 534,591 | |
| 0-8.75 2008-2037 | 1,715 | 1,634,654 | 3.63 |
| Wells Fargo Mortgage-backed Securities Trust: | |||
| Series 2004-2, Class A-1, 5.00 2019 | 558 | 534,886 | |
| 5.25-5.657 2033-2036 (1) | 364 | 358,192 | 1.49 |
| SBA CMBS Trust: | |||
| Series 2005-1, Class D, 6.219 2035 (2) | 320 | 314,325 | |
| Series 2006-1A, Class D, 5.852 2036 (2) | 300 | 291,357 | |
| 5.314 2036 (2) | 200 | 197,814 | 1.34 |
| Countrywide Alternative Loan Trust 5.50-6.029 2035-2036 (1) | 613 | 603,517 | 1.01 |
| Chase Commercial Mortgage Securities Corp., Series 1998-2, Class A-2, 6.39 2030 | 335 | 336,889 | .56 |
| Crown Castle Towers LLC, Series 2005-1, Class D, 5.612 2035 (2) | 325 | 317,146 | .53 |
| GMAC Mortgage Loan Trust, Series 2006-AR1, Class 2-A-1, 5.646 2036 (1) | 433 | 428,918 | .72 |
| Morgan Stanley Capital I, Inc., Series 1998-HF2, Class A-2, 6.48 2030 | 348 | 349,335 | .58 |
| L.A. Arena Funding, LLC, Series 1, Class A, 7.656 2026 (2) | 281 | 289,897 | .49 |
| Other securities | 7,341,659 | 12.27 | |
| 16,679,392 | 27.88 | ||
U.S. government & government agency bonds & notes - 15.45% | |||
| U.S. Treasury: | |||
| 4.50 2011 | 465 | 463,438 | |
| 4.25 2013 | 4,000 | 3,919,680 | |
| 12.50 2014 | 1,200 | 1,381,596 | |
| 11.25 2015 | 800 | 1,126,128 | |
| 4.50 2036 (4) | 1,490 | 1,394,312 | 13.85 |
| Freddie Mac 5.25% 2011 | 950 | 955,576 | 1.60 |
| 9,240,730 | 15.45 | ||
Other - 1.70% | |||
| Other securities | 1,018,393 | 1.70 | |
Total bonds & notes (cost: $50,410,637) | 50,026,600 | 83.64 | |
Market Value | Percent of net assets | ||
Common stocks - 0.01% | |||
Industrials - 0.01% | |||
| Other securities | $5,107 | .01 | |
Total common stocks (cost: $6,194) | 5,107 | .01 | |
Shares | Market Value | Percent of net assets | |
Preferred securities - 9.07% | |||
Financials - 9.07% | |||
| BNP U.S. Funding LLC, Series A, 7.738 noncumulative (1)(2) | 375,000 | $377,512 | |
| BNP Paribas 5.186 noncumulative (1)(2) | 300,000 | 281,214 | |
| BNP Paribas Capital Trust 9.003 noncumulative trust (1)(2) | 150,000 | 164,923 | 1.38 |
| Fannie Mae, Series O, 7.495 (1)(2) | 15,000 | 780,938 | 1.31 |
| Banco Santander Central Hispano, SA 6.80 (2) | 10,000 | 235,630 | |
| Banco Santander Central Hispano, SA 6.50 (2) | 10,000 | 229,380 | .78 |
| HSBC Capital Funding LP, Series 1, 9.547 noncumulative step-up (1)(2) | 400,000 | 442,621 | .74 |
| Deutsche Bank Capital Funding Trust I 7.872 (1)(2) | 300,000 | 313,321 | .52 |
| Resona Preferred Global Securities (Cayman) Ltd. 7.191 (1)(2) | 250,000 | 252,803 | .42 |
| Freddie Mac 5.57 | 10,000 | 227,500 | .38 |
| DBS Capital Funding Corp., Series A, 7.657 noncumulative guaranteed preference shares (1)(2) | 125,000 | 134,049 | .22 |
| Other securities | 1,985,338 | 3.32 | |
Total preferred securities (cost: $5,483,404) | 5,425,229 | 9.07 | |
Short-term securities - 5.61% | Principal amount (000) | Market Value | Percent of net assets |
| Coca-Cola Co. 5.25 due 8/6/2007 (2) | $750 | $749,344 | 1.25 |
| Emerson Electric Co. 5.23 due 8/15/2007 (2) | 600 | 598,692 | 1.00 |
| Park Avenue Receivables Co., LLC 5.28 due 8/3/2007 (2) | 550 | 549,758 | .92 |
| Honeywell International Inc. 5.28 due 8/10/2007 (2) | 510 | 509,252 | .85 |
| Wal-Mart Stores Inc. 5.20 due 8/1/2007 (2) | 500 | 499,927 | .84 |
| Prudential Funding, LLC 5.30 due 8/15/2007 | 450 | 449,006 | .75 |
Total short-term securities (cost: $3,355,979) | 3,355,979 | 5.61 | |
Total investment securities (cost: $59,256,214) | 58,812,915 | 98.33 | |
| Other assets less liabilities | 1,001,853 | 1.67 | |
Net assets | $59,814,768 | 100.00% | |
| "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio. | |||
| The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item. | |||
| (1) Coupon rate may change periodically. | |||
| (2) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. In practice, restricted securities in this fund are typically as liquid as unrestricted securities. The total value of all such restricted securities was $17,046,950, which represented 28.50% of the net assets of the fund. | |||
| (3) Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date. | |||
| (4) This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future. | |||
| The industry classifications shown in the summary investment portfolio were obtained from sources believed to be reliable and are not covered by the Report of Independent Registered Public Accounting Firm. | |||
| See Notes to Financial Statements | |||
Financial statements
Statements of assets and liabilities | ||||||||
| at July 31, 2007 | ||||||||
| Growth and Income Portfolio | Bond Portfolio | |||||||
Assets: | ||||||||
| Investment securities at market (cost: $96,595,560 and $59,256,214, respectively) | $ | 119,758,799 | $ | 58,812,915 | ||||
| Cash | 107,538 | 87,222 | ||||||
| Receivables for: | ||||||||
| Sales of investments | - | 1,327,116 | ||||||
| Sales of fund's shares | 188,462 | 125,700 | ||||||
| Dividends and interest | 94,769 | 719,933 | ||||||
| Total assets | 120,149,568 | 61,072,886 | ||||||
Liabilities: | ||||||||
| Payables for: | ||||||||
| Purchases of investments | 1,247,692 | 1,043,697 | ||||||
| Repurchases of fund's shares | 31,030 | 148,538 | ||||||
| Investment advisory services | 46,936 | 22,984 | ||||||
| Other fees and expenses | 43,411 | 42,899 | ||||||
| Total liabilities | 1,369,069 | 1,258,118 | ||||||
Net assets at July 31, 2007 | $ | 118,780,499 | $ | 59,814,768 | ||||
Net assets consist of: | ||||||||
| Capital paid in on shares of beneficial interest | $ | 93,210,129 | $ | 62,551,773 | ||||
| Undistributed (distributions in excess of) net investment income | 541,576 | (238,938 | ) | |||||
| Undistributed (accumulated) net realized gain (loss) | 1,864,944 | (2,054,522 | ) | |||||
| Net unrealized appreciation (depreciation) | 23,163,850 | (443,545 | ) | |||||
Net assets at July 31, 2007 | $ | 118,780,499 | $ | 59,814,768 | ||||
| Shares of beneficial interest issued and outstanding - unlimited shares authorized | ||||||||
| Shares outstanding | 7,359,217 | 3,779,961 | ||||||
| Net asset value per share | $ | 16.14 | $ | 15.82 | ||||
| See Notes to Financial Statements | ||||||||
Statements of operations | ||||||||
| for the year ended July 31, 2007 | ||||||||
| Growth and Income Portfolio | Bond Portfolio | |||||||
Investment income: | ||||||||
| Income: | ||||||||
| Dividends (net of non-U.S. taxes of $37,133 on Growth and Income Portfolio) | $ | 1,893,067 | $ | 119,644 | ||||
| Interest | 876,375 | 3,412,564 | ||||||
| Total income | 2,769,442 | 3,532,208 | ||||||
| Fees and expenses: | ||||||||
| Investment advisory services | 565,579 | 302,648 | ||||||
| Transfer agent services | 555 | 468 | ||||||
| Reports to shareholders | 15,680 | 8,757 | ||||||
| Registration statement and prospectus | 24,038 | 20,015 | ||||||
| Trustees' compensation | 70,688 | 39,649 | ||||||
| Trustees' travel expenses | 20,241 | 11,146 | ||||||
| Auditing | 42,394 | 42,376 | ||||||
| Legal | 25,104 | 25,104 | ||||||
| Custodian | 1,489 | 1,015 | ||||||
| Other | 10,059 | 10,036 | ||||||
| Total fees and expenses before waiver | 775,827 | 461,214 | ||||||
| Less waiver of fees and expenses: | ||||||||
| Investment advisory services | 56,558 | 30,265 | ||||||
| Total fees and expenses after waiver | 719,269 | 430,949 | ||||||
| Net investment income | 2,050,173 | 3,101,259 | ||||||
Net realized gain (loss) and unrealized | ||||||||
appreciation on investments and non-U.S. currency: | ||||||||
| Net realized gain (loss) on: | ||||||||
| Investments | 3,721,627 | (858,746 | ) | |||||
| Non-U.S. currency transactions | 556 | (19 | ) | |||||
| 3,722,183 | (858,765 | ) | ||||||
| Net unrealized appreciation (depreciation) on: | ||||||||
| Investments | 10,655,490 | 653,476 | ||||||
| Non-U.S. currency translations | 405 | (368 | ) | |||||
| 10,655,895 | 653,108 | |||||||
| Net realized gain (loss) and unrealized appreciation | ||||||||
| on investments and non-U.S. currency | 14,378,078 | (205,657 | ) | |||||
Net increase in net assets resulting from operations | $ | 16,428,251 | $ | 2,895,602 | ||||
| See Notes to Financial Statements | ||||||||
Growth and Income Portfolio
Statements of changes in net assets | ||||||||
| Year ended July 31, 2007 | Year ended July 31, 2006 | |||||||
Operations: | ||||||||
| Net investment income | $ | 2,050,173 | $ | 1,595,069 | ||||
| Net realized gain on investments and non-U.S. currency transactions | 3,722,183 | 3,677,773 | ||||||
| Net unrealized appreciation (depreciation) on investments and non-U.S. currency translations | 10,655,895 | (950,332 | ) | |||||
| Net increase in net assets resulting from operations | 16,428,251 | 4,322,510 | ||||||
Dividends and distributions paid to shareholders: | ||||||||
| Dividends from net investment income | (1,926,472 | ) | (1,573,538 | ) | ||||
| Distributions from net realized gain on investments | (5,358,259 | ) | (3,411,060 | ) | ||||
| Total dividends and distributions paid to shareholders | (7,284,731 | ) | (4,984,598 | ) | ||||
Net capital share transactions | 5,703,059 | (1,714,131 | ) | |||||
Total increase (decrease) in net assets | 14,846,579 | (2,376,219 | ) | |||||
Net assets: | ||||||||
| Beginning of year | 103,933,920 | 106,310,139 | ||||||
| End of year (including undistributed | ||||||||
| net investment income: $541,576 and $361,939, respectively) | $ | 118,780,499 | $ | 103,933,920 | ||||
Bond Portfolio
Statements of changes in net assets | ||||||||
| Year ended July 31, 2007 | Year ended July 31, 2006 | |||||||
Operations: | ||||||||
| Net investment income | $ | 3,101,259 | $ | 2,962,876 | ||||
| Net realized (loss) gain on investments and non-U.S. currency transactions | (858,765 | ) | 156,207 | |||||
| Net unrealized appreciation (depreciation) on investments and non-U.S. currency translations | 653,108 | (2,027,434 | ) | |||||
| Net increase in net assets resulting from operations | 2,895,602 | 1,091,649 | ||||||
Dividends paid to shareholders from net investment income | (3,461,418 | ) | (3,392,290 | ) | ||||
Net capital share transactions | 160,696 | (2,252,490 | ) | |||||
Total decrease in net assets | (405,120 | ) | (4,553,131 | ) | ||||
Net assets: | ||||||||
| Beginning of year | 60,219,888 | 64,773,019 | ||||||
| End of year (including distributions in excess of | ||||||||
| net investment income: $(238,938) and $(371,282), respectively) | $ | 59,814,768 | $ | 60,219,888 | ||||
| See Notes to Financial Statements | ||||||||
Notes to financial statements
| 1. | Organization and significant accounting policies |
Organization– Endowments (the "trust") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company and has initially issued two series of shares, Growth and Income Portfolio and Bond Portfolio (the "funds"). Growth and Income Portfolio seeks to provide long-term growth of principal, with income and preservation of capital as secondary objectives, primarily through investments in common stocks. Bond Portfolio seeks to provide as high a level of current income as is consistent with the preservation of capital through investments in fixed-income securities.
Significant accounting policies– The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the trust:
Security valuation– Equity securities are valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are valued at prices obtained from an independent pricing service when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days or less remaining to maturity. The ability of the issuers of the debt securities held by the funds to meet their obligations may be affected by economic developments in a specific industry, state or region.
Securities and other assets for which representative market quotations are not readily available or are considered unreliable by the investment adviser are fair valued as determined in good faith under procedures adopted by authority of the trust’s board of trustees. Market quotations may be considered unreliable if events occur that materially affect the value of securities (particularly non-U.S. securities) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange. Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions.
Security transactions and related investment income– Security transactions are recorded by the funds as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.
Dividends and distributions to shareholders– Dividends and distributions paid to shareholders are recorded on the ex-dividend date.
Non-U.S. currency translation– Assets and liabilities, including investment securities, denominated in non-U.S. currencies are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. On the accompanying financial statements, the effects of changes in non-U.S. exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in non-U.S. currencies are disclosed separately.
Mortgage dollar rolls – Bond Portfolio may enter into mortgage dollar roll transactions in which the fund sells a mortgage-backed security to a counterparty and simultaneously enters into an agreement with the same counterparty to buy back a similar security on a specific future date at a predetermined price. Each mortgage dollar roll is treated as a financing transaction; therefore, any gain or loss is considered unrealized until the roll reaches completion. Risks may arise due to the delayed payment date and the potential inability of counterparties to complete the transaction. Income is generated as consideration for entering into these transactions and is included in interest income on the accompanying financial statements.
| 2. | Non-U.S. investments |
Investment risk – The risks of investing in securities of non-U.S. issuers may include, but are not limited to, investment and repatriation restrictions; revaluation of currencies; adverse political, social and economic developments; government involvement in the private sector; limited and less reliable investor information; lack of liquidity; certain local tax law considerations; and limited regulation of the securities markets.
Taxation– Dividend and interest income is recorded net of non-U.S. taxes paid.
3. Federal income taxation and distributions
The funds comply with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intend to distribute substantially all of their net taxable income and net capital gains each year. The funds are not subject to income taxes to the extent such distributions are made. Therefore, no federal income tax provision is required.
The funds adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, on June 29, 2007. The implementation of FIN 48 resulted in no material liability for unrecognized tax benefits and no material change to the beginning net asset value of the funds.
As of and during the period ended July 31, 2007, the funds did not have a liability for any unrecognized tax benefits. The funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the funds did not incur any material interest or penalties.
The funds are not subject to examination by U.S. federal tax authorities for tax years before 2003 and by state tax authorities for tax years before 2002.
Distributions– Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as short-term capital gains and losses; unrealized appreciation of certain investments in non-U.S. securities; net capital losses; and amortization of premiums. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the funds for financial reporting purposes. The funds may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.
During the year ended July 31, 2007, Growth and Income Portfolio reclassified $55,936 from undistributed net realized gain to undistributed net investment income; and $53,421 from undistributed net realized gain to capital paid in on shares of beneficial interest to align financial reporting with tax reporting. During the year ended July 31, 2007, Bond Portfolio reclassified $492,503 from accumulated net realized loss to distributions in excess of net investment income to align financial reporting with tax reporting.
As of July 31, 2007, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investment securities were as follows:
| Growth and Income Portfolio | Bond Portfolio | |||||||||||
| Undistributed ordinary income | $ | 541,576 | $ | 335,505 | ||||||||
| Undistributed long-term capital gain | 1,864,944 | - | ||||||||||
| Capital loss carryforwards*: | ||||||||||||
| Expiring 2011 | - | $ | (197,715 | ) | ||||||||
| Expiring 2014 | - | (345,750 | ) | |||||||||
| Expiring 2015 | - | (1,278,462 | ) | (1,821,927 | ) | |||||||
Post-October capital loss deferrals (realized during the period November 1, 2006, through July 31, 2007)† | (194,669 | ) | ||||||||||
| Gross unrealized appreciation on investment securities | 24,857,907 | 51,634 | ||||||||||
| Gross unrealized depreciation on investment securities | (1,694,668 | ) | (1,062,699 | ) | ||||||||
| Net unrealized appreciation (depreciation) on investment securities | 23,163,239 | (1,011,065 | ) | |||||||||
| Cost of investment securities | 96,595,560 | 59,823,980 | ||||||||||
| *The capital loss carryforwards will be used to offset any capital gains realized by the fund in future years through the expiration dates. The fund will not make distributions from capital gains while capital loss carryforwards remain. | ||||||||||||
| †These deferrals are considered incurred in the subsequent year. | ||||||||||||
For the year ended July 31, 2007, Growth and Income Portfolio made distributions from realized short-term capital gains in the amount of $556,586 and from realized long-term capital gains in the amount of $4,801,673.
4. Fees and transactions with related parties
Capital Research and Management Company ("CRMC"), the funds’ investment adviser, is the parent company of American Funds Service Company SM ("AFS"), the funds’ transfer agent, and American Funds Distributors, SM Inc. ("AFD"), the principal underwriter of the funds’ shares.
Investment advisory services– The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on an annual rate of 0.50% on the first $150 million of each fund’s daily net assets and 0.40% on such assets in excess of $150 million.
The Investment Advisory and Service Agreement provides for a fee reduction to the extent that annual operating expenses exceed 0.75% of the average daily net assets of each fund. Expenses related to interest, taxes, brokerage commissions, transaction costs and extraordinary items are not subject to these limitations. For the year ended July 31, 2007, no such fee reductions were required, but CRMC is voluntarily waiving 10% of investment advisory services fees. During the year ended July 31, 2007, total investment advisory services fees waived by CRMC were $56,558 and $30,265 for Growth and Income Portfolio and Bond Portfolio, respectively. As a result, the fees shown on the accompanying financial statements of $565,579 and $302,648 for Growth and Income Portfolio and Bond Portfolio, respectively, were both reduced to an annualized rate of 0.450% of average daily net assets.
Transfer agent services– The funds have a transfer agent agreement with AFS for Class A shares. Under this agreement, this share class compensates AFS for transfer agent services including shareholder recordkeeping and communications.
Distribution services – The trust has a principal underwriting agreement with AFD. AFD does not receive compensation for any sales of the funds’ shares.
Affiliated officers and trustees – Officers and certain trustees of the trust are or may be considered to be affiliated with CRMC, AFD and AFS. No affiliated officers or trustees received any compensation directly from the funds.
5. Capital share transactions
Capital share transactions in the funds were as follows:
| Sales | Reinvestments of dividends and distributions | Repurchases | Net increase (decrease) | |||||||||||||||||||||||||||||
| Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | |||||||||||||||||||||||||
Year ended July 31, 2007 | ||||||||||||||||||||||||||||||||
| Growth and Income Portfolio | $ | 8,589,212 | 537,803 | $ | 6,779,377 | 439,467 | $ | (9,665,530 | ) | (614,420 | ) | $ | 5,703,059 | 362,850 | ||||||||||||||||||
| Bond Portfolio | 5,463,992 | 339,642 | 2,955,455 | 184,546 | (8,258,751 | ) | (511,423 | ) | 160,696 | 12,765 | ||||||||||||||||||||||
Year ended July 31, 2006 | ||||||||||||||||||||||||||||||||
| Growth and Income Portfolio | $ | 13,316,629 | 901,807 | $ | 4,649,782 | 317,885 | $ | (19,680,542 | ) | (1,336,012 | ) | $ | (1,714,131 | ) | (116,320 | ) | ||||||||||||||||
| Bond Portfolio | 6,094,902 | 377,010 | 2,805,680 | 174,045 | (11,153,072 | ) | (680,419 | ) | (2,252,490 | ) | (129,364 | ) | ||||||||||||||||||||
6. Investment transactions
Growth and Income Portfolio and Bond Portfolio made purchases of investment securities of $23,932,127 and $29,890,404 and sales of investment securities of $23,338,526 and $31,105,877, respectively, during the year ended July 31, 2007. Short-term securities were excluded.
Financial highlights
Growth and Income Portfolio
Income from investment operations (1) | Dividends and distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, beginning of year | Net investment income | Net gains on securities (both realized and unrealized) | Total from investment operations | Dividends (from net investment income) | Distributions (from capital gains) | Total dividends and distributions | Net asset value, end of year | Total return (2) | Net assets, end of year (in millions) | Ratio of expenses to average net assets before waivers | Ratio of expenses to average net assets after waivers (2) | Ratio of net income to average net assets (2) | ||||||||||||||||||||||||||||||||||||||||
| Year ended 7/31/2007 | $ | 14.86 | $ | .29 | $ | 2.03 | $ | 2.32 | $ | (.27 | ) | $ | (.77 | ) | $ | (1.04 | ) | $ | 16.14 | 16.02 | % | $ | 119 | .69 | % | .64 | % | 1.81 | % | |||||||||||||||||||||||
| Year ended 7/31/2006 | 14.95 | .23 | .44 | .67 | (.23 | ) | (.53 | ) | (.76 | ) | 14.86 | 4.61 | 104 | .71 | .66 | 1.56 | ||||||||||||||||||||||||||||||||||||
| Year ended 7/31/2005 | 14.10 | .24 | 1.20 | 1.44 | (.21 | ) | (.38 | ) | (.59 | ) | 14.95 | 10.33 | 106 | .69 | .66 | 1.60 | ||||||||||||||||||||||||||||||||||||
| Year ended 7/31/2004 | 12.57 | .20 | 1.53 | 1.73 | (.20 | ) | - | (.20 | ) | 14.10 | 13.81 | 90 | .64 | .64 | 1.43 | |||||||||||||||||||||||||||||||||||||
| Year ended 7/31/2003 | 11.61 | .22 | .94 | 1.16 | (.20 | ) | - | (.20 | ) | 12.57 | 10.18 | 76 | .68 | .68 | 1.88 | |||||||||||||||||||||||||||||||||||||
Bond Portfolio
Income from investment operations (1) | Dividends and distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, beginning of year | Net investment income | Net (losses) gains on securities (both realized and unrealized) | Total from investment operations | Dividends (from net investment income) | Distributions (from capital gains) | Total dividends and distributions | Net asset value, end of year | Total return (2) | Net assets, end of year (in millions) | Ratio of expenses to average net assets before waivers | Ratio of expenses to average net assets after waivers (2) | Ratio of net income to average net assets (2) | ||||||||||||||||||||||||||||||||||||||||
| Year ended 7/31/2007 | $ | 15.99 | $ | .83 | $ | (.07 | ) | $ | .76 | $ | (.93 | ) | $ | - | $ | (.93 | ) | $ | 15.82 | 4.81 | % | $ | 60 | .76 | % | .71 | % | 5.12 | % | |||||||||||||||||||||||
| Year ended 7/31/2006 | 16.62 | .81 | (.50 | ) | .31 | (.94 | ) | - | (.94 | ) | 15.99 | 1.94 | 60 | .79 | .74 | 5.00 | ||||||||||||||||||||||||||||||||||||
| Year ended 7/31/2005 | 16.72 | .78 | .05 | .83 | (.93 | ) | - | (.93 | ) | 16.62 | 5.07 | 65 | .74 | .71 | 4.61 | |||||||||||||||||||||||||||||||||||||
| Year ended 7/31/2004 | 16.57 | .83 | .22 | 1.05 | (.90 | ) | - | (.90 | ) | 16.72 | 6.37 | 59 | .70 | .70 | 4.93 | |||||||||||||||||||||||||||||||||||||
| Year ended 7/31/2003 | 15.93 | .89 | .77 | 1.66 | (1.02 | ) | - | (1.02 | ) | 16.57 | 10.64 | 59 | .71 | .71 | 5.38 | |||||||||||||||||||||||||||||||||||||
| Year ended July 31 | ||||||||||||||||||||
| 2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
| Growth and Income Portfolio | 24 | % | 25 | % | 31 | % | 32 | % | 29 | % | ||||||||||
| Bond Portfolio | 52 | % | 62 | % | 51 | % | 36 | % | 25 | % | ||||||||||
| (1) Based on average shares outstanding. | ||||||||||||||||||||
(2) This column reflects the impact, if any, of certain waivers from CRMC. During some of the periods shown, CRMC reduced fees for investment advisory services. | ||||||||||||||||||||
| See Notes to Financial Statements | ||||||||||||||||||||
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of Endowments:
We have audited the accompanying statements of assets and liabilities, including the summary investment portfolio of Endowments (the “trust”), comprising the Growth and Income and Bond Portfolios, as of July 31, 2007, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2007, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the portfolios constituting Endowments as of July 31, 2007, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Costa Mesa, California
September 7, 2007
Tax information
unaudited
We are required to advise you within 60 days of the funds’ fiscal year-end regarding the federal tax status of certain distributions received by shareholders during such fiscal year. The funds hereby designate the following amounts for the funds’ fiscal year ended July 31, 2007:
| Growth and Income Portfolio | Bond Portfolio | |||||||
| Long-term capital gains | $ | 4,802.00 | $ | - | ||||
| Qualified dividend income | 100 | % | 110,000 | |||||
| U.S. government income that may be exempt from state taxation | $ | 73,000 | 498,000 | |||||
Additional tax information will be mailed in early 2008 to applicable shareholders. Shareholders should consult their tax advisers.
Expense example unaudited
As a shareholder of the funds, you incur certain ongoing costs, including management fees and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the funds so you can compare these costs with the ongoing costs of investing in other mutual funds. The examples below are based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2007, through July 31, 2007).
Actual expenses:
The first line for each fund in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes:
The second line for each fund in the table below provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of the fund. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Notes:
Shareholders may be subject to fees charged by financial intermediaries. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.
| Beginning Account Value 2/1/2006 | Ending Account Value 7/31/2007 | Expenses Paid During Period* | Annualized Expense Ratio | |||||
| Growth & Income Portfolio -- actual return | $1,000.00 | $1,041.87 | $ 3.14 | .62% | ||||
| Growth & Income Portfolio -- assumed 5% return | 1,000.00 | 1,021.72 | 3.11 | .62 | ||||
| Bond Portfolio -- actual return | 1,000.00 | 1,008.67 | 3.44 | .69 | ||||
| Bond Portfolio -- assumed 5% return | 1,000.00 | 1,021.37 | 3.46 | .69 |
*The “expenses paid during period” are equal to the “annualized expense ratio,” multiplied by the average account value over the period, multiplied by the number of days in the period (181), and divided by 365 (to reflect the one-half year period).
Approval of Investment Advisory and Service Agreements
The board of trustees of the Endowments Trust (the “trust”) has approved the Investment Advisory and Service Agreements (the “agreements”) with respect to the trust’s Growth and Income Portfolio and Bond Portfolio (each “fund”) with Capital Research and Management Company (“CRMC”) for an additional one-year term through July 27, 2008. The board approved the agreements following the recommendation of the trust’s Contracts Committee (the “committee”), which is composed of all of the trust’s independent trustees. The board and the committee determined that the funds’ advisory fee structure was fair and reasonable in relation to the services provided and that approving the agreements was in the best interests of the funds and their shareholders.
In reaching this decision, the board and the committee took into account information furnished to them throughout the year, as well as information prepared specifically in connection with their review of the agreements based on advice of their independent counsel. They considered the factors discussed below, among others, but did not identify any single issue or particular piece of information that, in isolation, was the controlling factor.
1. Nature, extent and quality of services
The board and the committee considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of its organization; and the ongoing evolution of CRMC’s organizational structure designed to maintain and strengthen these qualities. The board and the committee also considered the nature, extent and quality of administrative, compliance and shareholder services provided by CRMC to each fund under its agreement and other agreements as well as the benefits to each fund’s shareholders from investing in a fund that is part of a large family of funds. The board and the committee concluded that the nature, extent and quality of the services provided by CRMC have benefited and should continue to benefit each fund and its shareholders.
2. Investment results
The Growth and Income Portfolio seeks to provide long-term growth of principal, with income and preservation of capital as secondary objectives. The Bond Portfolio seeks to provide as high a level of current income as is consistent with the preservation of capital. The board and the committee considered the investment results of each fund in light of its objective. They compared each fund’s total returns with those of other relevant funds (including the other funds that are the basis of the Lipper index for the category in which each fund is included) and market data such as relevant stock market indices. The information that accompanies the letter to shareholders included in this report, as well as that letter itself, includes certain information about each fund’s investment results. The board and the committee concluded that each fund’s short- and long-term results have been satisfactory and that CRMC’s record in managing the funds indicated that its continued management should benefit each fund and its shareholders.
3. Advisory fees and total expenses
The board and the committee compared the advisory fees and total expense levels of each fund to those of other relevant funds. The board and the committee observed that each fund’s advisory fees and expenses remain significantly below those of most other relevant funds. The board and the committee also noted the breakpoint discounts in each fund’s advisory fee structure that reduce the level of fees charged by CRMC to each fund as fund assets increase and the 10% advisory fee waiver in effect since April 2005. In addition, they reviewed information regarding the advisory fees paid by institutional clients of an affiliate of CRMC with investment mandates similar to those of the funds. They noted that, although the fees paid by those clients generally were lower than those paid by the funds, the differences appropriately reflected the significant investment, operational and regulatory differences between advising mutual funds and institutional clients. The board and the committee concluded that each fund’s cost structure was fair and reasonable in relation to the services provided, and that the shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by each fund.
4. Ancillary benefits
The board and the committee considered a variety of other benefits received by CRMC and its affiliates as a result of CRMC’s relationship with the funds and the American Funds, including fees paid to CRMC’s affiliated transfer agent, and possible ancillary benefits to CRMC’s institutional management affiliates. The board and the committee reviewed CRMC’s portfolio trading practices, noting that while CRMC receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the funds, it does not obtain third-party research or other services in return for allocating brokerage to such broker-dealers. The board and the committee took these ancillary benefits into account in evaluating the reasonableness of the advisory fees and other amounts paid to CRMC by each fund.
5. Adviser financial information
The board and the committee reviewed information regarding CRMC’s costs of providing services to the funds, including personnel, systems and resources of investment, compliance, trading, accounting and other administrative operations. They considered CRMC’s costs and willingness to invest in technology, infrastructure and staff to maintain and expand services and capabilities, respond to industry and regulatory developments and attract and retain qualified personnel. They noted information previously received regarding the compensation structure for CRMC’s investment professionals. The board and the committee also compared CRMC’s profitability to the reported results of several large, publicly held investment management companies. The board and the committee noted the competitiveness and cyclicality of both the mutual fund industry and the capital markets and the importance in that environment of CRMC’s long-term profitability for maintaining its independence, company culture and management continuity. They further considered the breakpoint discounts in each fund’s advisory fee structure and the impact of CRMC’s current 10% advisory fee waiver. The board and the committee concluded that each fund’s advisory fee structure reflected a reasonable sharing of benefits between CRMC and its shareholders.
Board of trustees
“Independent” trustees | ||
Year first | ||
elected | ||
Name, age and | a trustee | |
telephone number | of the trust1 | Principal occupation(s) during past five years |
| Ronald P. Badie, 64 | 2006 | Retired; former Vice Chairman, |
| 818/790-1133 | Deutsche Bank Alex. Brown | |
| Robert J. Denison, 66 | 2003 | Chair, First Security Management (private |
| 505/988-5415 | investment) | |
| John E. Kobara, 52 | 2006 | CEO, CK 12 Foundation, former President and CEO, |
| 213/610-3261 | Big Brothers, Big Sisters of Greater Los Angeles and Inland Empire; former Senior Vice President, Sylvan Learning Systems; former President and CEO, OnlineLearning.net | |
| Steven D. Lavine, Ph.D., 60 | 1994 | President, California Institute of the Arts |
| 661/255-1050 | ||
| Patricia A. McBride, 64 | 1988 | Chief Financial Officer, Cosmetic and Maxillofacial |
| Chairman of the Board | Surgery Center, Medical City Dallas Hospital | |
| (Independent and Non-Executive) | ||
| 214/368-0268 | ||
| Robert C. Ziebarth, 71 | 1993 | Management consultant, Ziebarth Company |
| 208/725-0535 | (management and financial consulting) | |
“Independent” trustees | ||
Number of | ||
portfolios | ||
in fund | ||
complex2 | ||
Name, age and | overseen by | |
telephone number | trustee | Other directorships3 held by trustee |
| Ronald P. Badie, 64 | 1 | Amphenol Corp.; Merisel, Inc.; Nautilus, Inc.; |
| 818/790-1133 | Obagi Medical Products, Inc. | |
| Robert J. Denison, 66 | 5 | None |
| 505/988-5415 | ||
| John E. Kobara, 52 | 1 | None |
| 213/610-3261 | ||
| Steven D. Lavine, Ph.D., 60 | 1 | None |
| 661/255-1050 | ||
| Patricia A. McBride, 64 | 1 | None |
| Chairman of the Board | ||
| (Independent and Non-Executive) | ||
| 214/368-0268 | ||
| Robert C. Ziebarth, 71 | 1 | None |
| 208/725-0535 | ||
“Interested” trustees4 | ||
Year first | ||
elected a | ||
Name, age, | trustee or | Principal occupation(s) during past five years and |
position with trust | officer of | positions held with affiliated entities or the principal |
and telephone number | the trust1 | underwriter of the trust |
| Robert G. O’Donnell, 63 | 1995 | Senior Vice President and Director, Capital |
| Vice Chairman of the Board | Research and Management Company | |
| 415/393-7120 | ||
| Thomas E. Terry, 69 | 1969 | Private investor; Consultant; former Vice President |
| 608/256-9910 | and Secretary, Capital Research and Management Company (retired 1994) | |
“Interested” trustees4 | ||
Number of | ||
portfolios | ||
in fund | ||
Name, age, | complex2 | |
position with trust | overseen by | |
and telephone number | trustee | Other directorships3 held by trustee |
| Robert G. O’Donnell, 63 | 2 | None |
| Vice Chairman of the Board | ||
| 415/393-7120 | ||
| Thomas E. Terry, 69 | 1 | None |
| 608/256-9910 | ||
| Trustee emeritus | ||
| Robert B. Egelston, 76 | Former Chairman of the Board, The Capital Group Companies, Inc.5 |
The statement of additional information includes additional information about trustees and is available without charge upon request by calling American Funds Service Company at 800/421-0180. The address for all trustees and officers of the trust is 333 South Hope Street, Los Angeles, CA 90071, Attention: Fund Secretary.
Other officers6
Year first | ||
elected | Principal occupation(s) during past five years | |
Name, age and | an officer | and positions held with affiliated entities or |
position with trust | of the trust1 | the principal underwriter of the trust |
| John H. Smet, 51 | 1996 | Senior Vice President, Capital Research and |
| President | Management Company; | |
Director, American Funds Distributors, Inc.5 | ||
| Abner D. Goldstine, 77 | 1995 | Senior Vice President and Director, Capital |
| Senior Vice President | Research and Management Company | |
| Gregory D. Johnson, 44 | 2000 | Senior Vice President, Capital Research Company5 |
| Vice President | ||
| Krista M. Johnson, 42 | 2000 | Assistant Vice President — Client Services Group, |
| Vice President | Capital Research and Management Company | |
| Patrick F. Quan, 49 | 1986 | Vice President — Fund Business Management |
| Vice President and Secretary | Group, Capital Research and Management Company | |
| Dori Laskin, 56 | 2007 | Vice President — Fund Business Management |
| Treasurer | Group, Capital Research and Management Company | |
| Ari M. Vinocor, 32 | 2005 | Vice President — Fund Business Management |
| Assistant Treasurer | Group, Capital Research and Management Company | |
1 Trustees and officers of the trust serve until their resignation, removal or retirement. | ||
2 Capital Research and Management Company manages the American Funds, consisting of 30 funds. Capital Research and Management Company also manages American Funds Insurance Series,® which serves as the underlying investment vehicle for certain variable insurance contracts, American Funds Target Date Retirement Series,® Inc., which is available to investors in tax-deferred retirement plans and IRAs, and Endowments, whose shareholders are limited to certain nonprofit organizations. | ||
3 This includes all directorships (other than those in the American Funds) that are held by each trustee as a director of a public company or a registered investment company. | ||
4“Interested persons” within the meaning of the 1940 Act, on the basis of their affiliation with the funds’ investment adviser, Capital Research and Management Company, or affiliated entities. | ||
5 Company affiliated with Capital Research and Management Company. | ||
6 All of the officers listed, except Krista M. Johnson and Dori Laskin, are officers and/or directors/trustees of one or more of the other funds for which Capital Research and Management Company serves as investment adviser. | ||
[logo - Capital Research and Management Company sm]
Office of the trust
One Market
Steuart Tower, Suite 1800
Mailing Address: P.O. Box 7650
San Francisco, CA 94120-7650
Investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
Transfer agent for shareholder accounts
American Funds Service Company
Institutional Investment Services/HOST
P.O. Box 25065
Santa Ana, CA 92799-5965
Custodian of assets
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
Independent registered public accounting firm
Deloitte & Touche LLP
695 Town Center Drive
Suite 1200
Costa Mesa, CA 92626-7188
Counsel
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street
Los Angeles, CA 90071-2228
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
For more information about any of the American Funds, please ask your investment professional for a prospectus.
“American Funds Proxy Voting Guidelines” — which describes how we vote proxies relating to portfolio securities — is available free of charge on the U.S. Securities and Exchange Commission (SEC) website at sec.gov, on the American Funds website at americanfunds.com or upon request by calling American Funds Service Company (AFS) at 800/421-0180. The funds file their proxy voting records with the SEC for the 12 months ended June 30 by August 31. The reports also are available on the Endowments website at americanfunds.com/endowments and on the SEC website.
A complete July 31, 2007, portfolio of Endowments’ investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).
Endowments files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This filing is available free of charge on the SEC website. You may also review or, for a fee, copy this filing at the SEC’s Public Reference Room in Washington, D.C. (800/SEC-0330). Additionally, the list of portfolio holdings also is available by calling AFS.
This report is for the information of shareholders of Endowments, but it may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the funds. If used as sales material after September 30, 2007, this report must be accompanied by an Endowments statistical update for the most recently completed calendar quarter. This update is available at americanfunds.com/endowments.
The Capital Group Companies
Capital International Capital Guardian Capital Research and Management Capital Bank and Trust American Funds
Lit. No. MFGEAR-985-0907P
Litho in USA REG/PL/6375-S10338
© 2007 Endowments
Printed on recycled paper
ITEM 2 – Code of Ethics
The Registrant has adopted a Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer. The Registrant undertakes to provide to any person without charge, upon request, a copy of the Code of Ethics. Such request can be made to American Funds Service Company at 800/421-0180 or to the Secretary of the Registrant, One Market, Steuart Tower, San Francisco, California 94120.
ITEM 3 – Audit Committee Financial Expert
The Registrant’s board has determined that Robert C. Ziebarth, a member of the Registrant’s audit committee, is an “audit committee financial expert” and "independent," as such terms are defined in this Item. This designation will not increase the designee’s duties, obligations or liability as compared to his or her duties, obligations and liability as a member of the audit committee and of the board, nor will it reduce the responsibility of the other audit committee members. There may be other individuals who, through education or experience, would qualify as "audit committee financial experts" if the board had designated them as such. Most importantly, the board believes each member of the audit committee contributes significantly to the effective oversight of the Registrant’s financial statements and condition.
ITEM 4 – Principal Accountant Fees and Services
| Registrant: | ||||
| a) Audit Fees: | ||||
| 2006 | $71,000 | |||
| 2007 | $75,000 | |||
| b) Audit-Related Fees: | ||||
| 2006 | $51 | |||
| 2007 | $66 | |||
| The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants. | ||||
| c) Tax Fees: | ||||
| 2006 | $9,000 | |||
| 2007 | $10,000 | |||
| The tax fees consist of professional services relating to the preparation of the Registrant’s tax returns. | ||||
| d) All Other Fees: | ||||
| 2006 | None | |||
| 2007 | None | |||
Adviser and affiliates (includes only fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant and were subject to the pre-approval policies described below): | ||||
| a) Not Applicable | ||||
| b) Audit-Related Fees: | ||||
| 2006 | $374,000 | |||
| 2007 | $1,093,000 | |||
| The audit–related fees consist of assurance and related services relating to the examination of the Registrant’s transfer agent, principal underwriter and investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants. | ||||
| c) Tax Fees: | ||||
| 2006 | None | |||
| 2007 | $12,000 | |||
| The tax fees consist of consulting services relating to the Registrant’s investments. | ||||
| d) All Other Fees: | ||||
| 2006 | $21,000 | |||
| 2007 | None | |||
| The other fees consist of consulting services related to the Registrant’s compliance program. | ||||
The Registrant’s audit committee will pre-approve all audit and permissible non-audit services that the committee considers compatible with maintaining the independent registered public accounting firm’s independence. The pre-approval requirement will extend to all non-audit services provided to the Registrant, the investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant. The committee will not delegate its responsibility to pre-approve these services to the investment adviser. The committee may delegate to one or more committee members the authority to review and pre-approve audit and permissible non-audit services. Actions taken under any such delegation will be reported to the full committee at its next meeting. The pre-approval requirement is waived with respect to non-audit services if certain conditions are met. The pre-approval requirement was not waived for any of the non-audit services listed above provided to the Registrant, adviser, and affiliates.
Aggregate non-audit fees paid to the Registrant’s auditors, including fees for all services billed to the Registrant and the adviser and affiliates that provide ongoing services to the Registrant were $811,000 for fiscal year 2006 and $1,382,000 for fiscal year 2007. The non-audit services represented by these amounts were brought to the attention of the committee and considered to be compatible with maintaining the auditors’ independence.
ITEM 5 – Audit Committee of Listed Registrants
Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.
ITEM 6 – Schedule of Investments
[logo – Capital Research and Management sm]
Endowments, Growth and Income PortfolioSM
Investment portfolio
July 31, 2007
| Common stocks — 87.56% | Shares | Market value | ||||||
INFORMATION TECHNOLOGY — 20.26% | ||||||||
| Microsoft Corp. | 143,000 | $ | 4,145,570 | |||||
| Nokia Corp. (ADR) | 130,000 | 3,723,200 | ||||||
Oracle Corp.1 | 147,000 | 2,810,640 | ||||||
| International Business Machines Corp. | 20,000 | 2,213,000 | ||||||
Cisco Systems, Inc.1 | 68,000 | 1,965,880 | ||||||
| Intel Corp. | 80,000 | 1,889,600 | ||||||
| QUALCOMM Inc. | 30,000 | 1,249,500 | ||||||
Google Inc., Class A1 | 2,200 | 1,122,000 | ||||||
| Motorola, Inc. | 62,000 | 1,053,380 | ||||||
| Texas Instruments Inc. | 28,000 | 985,320 | ||||||
| Analog Devices, Inc. | 20,000 | 709,000 | ||||||
| Hewlett-Packard Co. | 15,000 | 690,450 | ||||||
EMC Corp.1 | 33,000 | 610,830 | ||||||
| Linear Technology Corp. | 15,000 | 534,750 | ||||||
Dell Inc.1 | 13,000 | 363,610 | ||||||
24,066,730 | ||||||||
CONSUMER STAPLES — 14.00% | ||||||||
| Wal-Mart Stores, Inc. | 75,000 | 3,446,250 | ||||||
| Altria Group, Inc. | 46,500 | 3,090,855 | ||||||
| PepsiCo, Inc. | 32,000 | 2,099,840 | ||||||
| Walgreen Co. | 43,000 | 1,899,740 | ||||||
| Bunge Ltd. | 14,000 | 1,268,540 | ||||||
L’Oréal SA2 | 10,000 | 1,143,868 | ||||||
| Coca-Cola Co. | 20,000 | 1,042,200 | ||||||
| Avon Products, Inc. | 26,500 | 954,265 | ||||||
| WD-40 Co. | 26,000 | 862,940 | ||||||
| Kraft Foods Inc., Class A | 25,000 | 818,750 | ||||||
16,627,248 | ||||||||
HEALTH CARE — 11.75% | ||||||||
| Medtronic, Inc. | 45,000 | 2,280,150 | ||||||
| Eli Lilly and Co. | 30,000 | 1,622,700 | ||||||
Novo Nordisk A/S, Class B2 | 15,000 | 1,580,802 | ||||||
Roche Holding AG2 | 8,000 | 1,414,842 | ||||||
| Pfizer Inc | 55,000 | 1,293,050 | ||||||
| Merck & Co., Inc. | 25,000 | 1,241,250 | ||||||
| Johnson & Johnson | 20,000 | 1,210,000 | ||||||
| Bristol-Myers Squibb Co. | 33,000 | 937,530 | ||||||
| Becton, Dickinson and Co. | 11,000 | 839,960 | ||||||
Amgen Inc.1 | 10,000 | 537,400 | ||||||
Sanofi-Aventis2 | 6,000 | 501,910 | ||||||
| Stryker Corp. | 8,000 | 499,440 | ||||||
13,959,034 | ||||||||
FINANCIALS — 10.24% | ||||||||
Berkshire Hathaway Inc., Class A1 | 20 | 2,200,000 | ||||||
| Fannie Mae | 36,000 | 2,154,240 | ||||||
| Wells Fargo & Co. | 60,000 | 2,026,200 | ||||||
| American International Group, Inc. | 19,000 | 1,219,420 | ||||||
| Wachovia Corp. | 22,000 | 1,038,620 | ||||||
| Bank of America Corp. | 20,000 | 948,400 | ||||||
| Citigroup Inc. | 20,000 | 931,400 | ||||||
| Lincoln National Corp. | 12,000 | 723,840 | ||||||
| Marsh & McLennan Companies, Inc. | 17,000 | 468,350 | ||||||
| U.S. Bancorp | 15,000 | 449,250 | ||||||
12,159,720 | ||||||||
INDUSTRIALS — 9.92% | ||||||||
| General Electric Co. | 76,000 | 2,945,760 | ||||||
| United Parcel Service, Inc., Class B | 29,000 | 2,195,880 | ||||||
| Caterpillar Inc. | 20,000 | 1,576,000 | ||||||
| Northrop Grumman Corp. | 15,000 | 1,141,500 | ||||||
| Lockheed Martin Corp. | 10,000 | 984,800 | ||||||
| Avery Dennison Corp. | 15,000 | 920,100 | ||||||
| FedEx Corp. | 7,000 | 775,180 | ||||||
| Illinois Tool Works Inc. | 13,000 | 715,650 | ||||||
| 3M Co. | 6,000 | 533,520 | ||||||
11,788,390 | ||||||||
ENERGY — 8.62% | ||||||||
| Exxon Mobil Corp. | 44,000 | 3,745,720 | ||||||
| Chevron Corp. | 24,000 | 2,046,240 | ||||||
| Schlumberger Ltd. | 20,000 | 1,894,400 | ||||||
| ConocoPhillips | 23,000 | 1,859,320 | ||||||
| Royal Dutch Shell PLC, Class A (ADR) | 9,000 | 698,310 | ||||||
10,243,990 | ||||||||
CONSUMER DISCRETIONARY — 8.15% | ||||||||
| Target Corp. | 30,000 | 1,817,100 | ||||||
| Time Warner Inc. | 80,000 | 1,540,800 | ||||||
| Lowe’s Companies, Inc. | 54,000 | 1,512,540 | ||||||
| Walt Disney Co. | 30,000 | 990,000 | ||||||
Vivendi SA2 | 22,000 | 934,228 | ||||||
| Idearc Inc. | 26,000 | 902,460 | ||||||
| Home Depot, Inc. | 22,000 | 817,740 | ||||||
| Carnival Corp., units | 15,000 | 664,650 | ||||||
| Gannett Co., Inc. | 10,000 | 499,000 | ||||||
9,678,518 | ||||||||
TELECOMMUNICATION SERVICES — 1.90% | ||||||||
| Verizon Communications Inc. | 25,000 | 1,065,500 | ||||||
| Sprint Nextel Corp., Series 1 | 36,000 | 739,080 | ||||||
Vodafone Group PLC2 | 150,000 | 455,921 | ||||||
2,260,501 | ||||||||
MATERIALS — 1.90% | ||||||||
| Air Products and Chemicals, Inc. | 13,000 | 1,122,810 | ||||||
| Alcoa Inc. | 15,000 | 573,000 | ||||||
| International Paper Co. | 15,000 | 556,050 | ||||||
2,251,860 | ||||||||
MISCELLANEOUS — 0.82% | ||||||||
| Other common stocks in initial period of acquisition | 967,681 | |||||||
Total common stocks (cost: $80,840,433) | 104,003,672 | |||||||
| Principal amount | Market | |||||||
| Short-term securities — 13.26% | (000 | ) | value | |||||
Procter & Gamble International Funding S.C.A. 5.22% due 8/1/20073 | $ | 2,300 | $ | 2,299,665 | ||||
| Prudential Funding, LLC 5.25% due 8/10/2007 | 1,150 | 1,148,322 | ||||||
| Paccar Financial Corp. 5.22% due 8/17/2007 | 1,100 | 1,097,286 | ||||||
United Parcel Service, Inc. 5.22% due 8/31/20073 | 1,100 | 1,095,055 | ||||||
CAFCO, LLC 5.27% due 9/12/20073 | 1,100 | 1,093,076 | ||||||
Hewlett-Packard Co. 5.25% due 8/2/20073 | 1,000 | 999,708 | ||||||
Emerson Electric Co. 5.22% due 8/7/20073 | 1,000 | 998,984 | ||||||
Triple-A One Funding Corp. 5.26% due 8/9/20073 | 1,000 | 998,683 | ||||||
Variable Funding Capital Corp. 5.265% due 8/8/20073 | 900 | 898,945 | ||||||
Clipper Receivables Co., LLC 5.28% due 8/6/20073 | 838 | 837,262 | ||||||
Coca-Cola Co. 5.23% due 9/20/20073 | 805 | 799,033 | ||||||
Abbott Laboratories 5.23% due 8/31/20073 | 700 | 696,843 | ||||||
AT&T Inc. 5.23% due 8/22/20073 | 650 | 647,921 | ||||||
Hershey Co. 5.20% due 9/13/20073 | 640 | 635,927 | ||||||
Harley-Davidson Funding Corp. 5.22% due 8/3/20073 | 600 | 599,738 | ||||||
Park Avenue Receivables Co., LLC 5.27% due 8/14/20073 | 600 | 598,769 | ||||||
Private Export Funding Corp. 5.245% due 8/2/20073 | 310 | 309,910 | ||||||
Total short-term securities (cost: $15,755,127) | 15,755,127 | |||||||
Total investment securities (cost: $96,595,560) | 119,758,799 | |||||||
Other assets less liabilities | (978,300 | ) | ||||||
Net assets | $ | 118,780,499 | ||||||
“Miscellaneous” securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
1 | Security did not produce income during the last 12 months. |
2 | Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in “Miscellaneous,” was $6,031,571. |
3 | Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. In practice, restricted securities in this fund are typically as liquid as unrestricted securities. The total value of all such restricted securities was $13,509,519, which represented 11.37% of the net assets of the fund. |
ADR = American Depositary Receipts
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so you may lose money.
Investors should carefully consider the investment objectives, risks, and expenses of the funds. This and other important information is contained in the funds’ prospectus, which should be read carefully before investing.
Endowments, Bond PortfolioSM
Investment portfolio
July 31, 2007
| Bonds & notes — 83.64% | Principal amount (000) | Market value | ||||||
CORPORATE BONDS & NOTES — 38.61% | ||||||||
Financials — 20.40% | ||||||||
Residential Capital Corp. 6.46% 20091 | $ | 500 | $ | 470,039 | ||||
| General Motors Acceptance Corp. 7.25% 2011 | 455 | 431,507 | ||||||
| Residential Capital Corp. 6.50% 2013 | 350 | 314,443 | ||||||
General Motors Acceptance Corp. 7.56% 20141 | 250 | 232,966 | ||||||
Washington Mutual, Inc. 5.66% 20121 | 650 | 643,233 | ||||||
Washington Mutual Preferred Funding I Ltd., Series A-1, 6.534% (undated)1,2 | 400 | 373,788 | ||||||
Washington Mutual Preferred Funding II Ltd. 6.665% (undated)1,2 | 300 | 267,567 | ||||||
| Ford Motor Credit Co. 7.375% 2009 | 150 | 144,885 | ||||||
| Ford Motor Credit Co. 7.875% 2010 | 650 | 621,971 | ||||||
AIG SunAmerica Global Financing VII 5.85% 20082 | 125 | 125,618 | ||||||
| American General Finance Corp., Series I, 5.40% 2015 | 250 | 240,861 | ||||||
ILFC E-Capital Trust II 6.25% 20651,2 | 255 | 246,141 | ||||||
American International Group, Inc., Series A-1, 6.25% 20871 | 125 | 115,514 | ||||||
| Hospitality Properties Trust 6.75% 2013 | 215 | 222,468 | ||||||
| Hospitality Properties Trust 6.30% 2016 | 400 | 404,083 | ||||||
Development Bank of Singapore Ltd. 7.875% 20092 | 250 | 261,694 | ||||||
DBS Bank Ltd. 5.97% 20211,2 | 250 | 254,788 | ||||||
TuranAlem Finance BV 8.50% 20152 | 400 | 366,000 | ||||||
TuranAlem Finance BV 8.25% 20372 | 100 | 88,750 | ||||||
Lincoln National Corp. 7.00% 20661 | 425 | 427,732 | ||||||
SocGen Real Estate Co. LLC, Series A, 7.64% (undated)1,2 | 375 | 376,297 | ||||||
| Simon Property Group, LP 4.875% 2010 | 125 | 123,286 | ||||||
| Simon Property Group, LP 5.60% 2011 | 250 | 250,483 | ||||||
Standard Chartered PLC 6.409% (undated)1,2 | 400 | 365,678 | ||||||
Resona Bank, Ltd. 5.85% (undated)1,2 | 375 | 356,629 | ||||||
Santander Issuances, SA Unipersonal 5.805% 20161,2 | 100 | 101,126 | ||||||
Abbey National PLC 6.70% (undated)1 | 250 | 252,521 | ||||||
Banco Santander-Chile 5.375% 20142 | 300 | 286,920 | ||||||
| CNA Financial Corp. 6.50% 2016 | 250 | 250,025 | ||||||
| Berkshire Hathaway Finance Corp. 4.125% 2010 | 250 | 244,955 | ||||||
United Overseas Bank Ltd. 5.375% 20191,2 | 250 | 241,230 | ||||||
State Street Capital Trust IV 6.355% 20771 | 250 | 237,080 | ||||||
CIT Group Inc. 6.10% 20671 | 250 | 215,524 | ||||||
PNC Funding Corp., Series I, 6.517% (undated)1,2 | 200 | 201,907 | ||||||
MBNA Global Capital Funding, Series B, 6.156% 20271 | 200 | 199,886 | ||||||
UniCredito Italiano SpA 5.584% 20171,2 | 200 | 198,220 | ||||||
| Kimco Realty Corp., Series C, 4.82% 2014 | 200 | 188,599 | ||||||
| SLM Corp., Series A, 4.50% 2010 | 200 | 187,155 | ||||||
QBE Capital Funding II LP 6.797% (undated)1,2 | 200 | 187,070 | ||||||
Prudential Holdings, LLC, Series C, 8.695% 20232,3 | 150 | 184,803 | ||||||
| Downey Financial Corp. 6.50% 2014 | 150 | 147,832 | ||||||
| United Dominion Realty Trust, Inc. 6.50% 2009 | 125 | 128,260 | ||||||
BCI U.S. Funding Trust I 8.01% noncumulative preferred (undated)1,2 | 125 | 127,828 | ||||||
| ORIX Corp. 5.48% 2011 | 125 | 124,483 | ||||||
| Lehman Brothers Holdings Inc. 6.50% 2017 | 125 | 122,988 | ||||||
John Hancock Global Funding II, Series 2004-A, 3.50% 20092 | 125 | 121,599 | ||||||
Fifth Third Capital Trust IV 6.50% 20671 | 125 | 118,541 | ||||||
Allstate Corp., Series A, 6.50% 20671 | 125 | 115,727 | ||||||
Nationwide Mutual Insurance Co. 7.875% 20332 | 85 | 99,427 | ||||||
BNP Paribas 7.195% (undated)1,2 | 100 | 99,213 | ||||||
Credit Agricole SA 6.637% (undated)1,2 | 100 | 93,756 | ||||||
12,203,096 | ||||||||
Consumer discretionary — 4.42% | ||||||||
| Federated Retail Holdings, Inc. 5.35% 2012 | 400 | 397,636 | ||||||
| Federated Retail Holdings, Inc. 5.90% 2016 | 300 | 290,678 | ||||||
| DaimlerChrysler North America Holding Corp. 8.00% 2010 | 600 | 636,814 | ||||||
| MDC Holdings, Inc. 5.50% 2013 | 150 | 141,136 | ||||||
| MDC Holdings, Inc. 5.375% 2014 | 250 | 224,886 | ||||||
| D.R. Horton, Inc. 5.25% 2015 | 300 | 253,778 | ||||||
| Tele-Communications, Inc. 9.80% 2012 | 215 | 247,539 | ||||||
| Ryland Group, Inc. 5.375% 2012 | 250 | 235,368 | ||||||
Seminole Tribe of Florida 5.798% 20132,3 | 135 | 134,423 | ||||||
| Toll Brothers, Inc. 5.15% 2015 | 90 | 78,701 | ||||||
2,640,959 | ||||||||
Telecommunication services — 3.62% | ||||||||
| SBC Communications Inc. 6.25% 2011 | 250 | 255,833 | ||||||
| AT&T Wireless Services, Inc. 7.875% 2011 | 100 | 107,588 | ||||||
| AT&T Wireless Services, Inc. 8.125% 2012 | 500 | 551,309 | ||||||
| SBC Communications Inc. 5.625% 2016 | 250 | 241,955 | ||||||
France Télécom 7.75% 20111 | 250 | 268,640 | ||||||
| Embarq Corp. 6.738% 2013 | 250 | 254,574 | ||||||
| Nextel Communications, Inc., Series E, 6.875% 2013 | 150 | 144,130 | ||||||
| Verizon Communications Inc. 5.50% 2017 | 150 | 144,028 | ||||||
| Valor Telecommunications Enterprises, LLC and Valor Telecommunications Enterprises Finance Corp. 7.75% 2015 | 100 | 102,097 | ||||||
| Telecom Italia Capital SA 5.25% 2015 | 100 | 93,195 | ||||||
2,163,349 | ||||||||
Industrials — 3.54% | ||||||||
| Continental Airlines, Inc., Series 2001-1, Class A-2, 6.503% 2011 | 385 | 388,431 | ||||||
Continental Airlines, Inc., Series 2000-2, Class A-1, 7.707% 20223 | 182 | 193,271 | ||||||
Hutchison Whampoa International Ltd. 7.00% 20112 | 250 | 260,942 | ||||||
Hutchison Whampoa International Ltd. 6.50% 20132 | 150 | 154,282 | ||||||
| Delta Air Lines, Inc., Series 2002-1, Class G-2, MBIA insured, 6.417% 2014 | 200 | 200,483 | ||||||
Delta Air Lines, Inc., Series 2002-1, Class G-1, MBIA insured, 6.718% 20243 | 143 | 146,398 | ||||||
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class G, MBIA insured, 6.664% 20132,3 | 313 | 329,018 | ||||||
American Airlines, Inc., Series 2001-2, Class A-1, 6.978% 20123 | 260 | 261,724 | ||||||
| USG Corp. 6.30% 2016 | 125 | 123,733 | ||||||
Southern Capital Corp. Pass Through Trust, Series 2002-1, Class G, MBIA insured, 5.70% 20232,3 | 62 | 61,384 | ||||||
2,119,666 | ||||||||
Utilities — 3.42% | ||||||||
FPL Energy American Wind, LLC 6.639% 20232,3 | 227 | 232,154 | ||||||
FPL Energy National Wind, LLC 5.608% 20242,3 | 219 | 213,095 | ||||||
Midwest Generation, LLC, Series B, 8.56% 20163 | 83 | 86,219 | ||||||
Homer City Funding LLC 8.734% 20263 | 292 | 319,877 | ||||||
| Reliant Energy Resources Corp. 7.75% 2011 | 250 | 266,128 | ||||||
AES Ironwood, LLC 8.857% 20253 | 224 | 236,530 | ||||||
| MidAmerican Energy Holdings Co., Series D, 5.00% 2014 | 225 | 216,515 | ||||||
| Constellation Energy Group, Inc. 6.125% 2009 | 200 | 202,459 | ||||||
Abu Dhabi National Energy Co. PJSC (TAQA) 6.50% 20362 | 150 | 148,221 | ||||||
| PSEG Power LLC 3.75% 2009 | 125 | 121,685 | ||||||
2,042,883 | ||||||||
Energy — 1.09% | ||||||||
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 20142,3 | 300 | 294,000 | ||||||
TransCanada PipeLines Ltd. 6.35% 20671 | 150 | 140,645 | ||||||
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 20092,3 | 130 | 126,972 | ||||||
Qatar Petroleum 5.579% 20112 | 89 | 89,404 | ||||||
651,021 | ||||||||
Health Care — 1.04% | ||||||||
| Cardinal Health, Inc. 6.75% 2011 | 250 | 260,559 | ||||||
| Cardinal Health, Inc. 4.00% 2015 | 100 | 87,792 | ||||||
UnitedHealth Group Inc. 6.00% 20172 | 150 | 150,599 | ||||||
| Amgen Inc. 4.00% 2009 | 125 | 121,322 | ||||||
620,272 | ||||||||
Materials — 0.65% | ||||||||
| Alcoa Inc. 5.55% 2017 | 300 | 290,229 | ||||||
Stora Enso Oyj 7.25% 20362 | 100 | 98,784 | ||||||
389,013 | ||||||||
Information Technology — 0.25% | ||||||||
| National Semiconductor Corp. 6.15% 2012 | 150 | 150,769 | ||||||
Consumer staples — 0.18% | ||||||||
Tyson Foods, Inc. 6.85% 20161 | 105 | 107,057 | ||||||
MORTGAGE- AND ASSET-BACKED OBLIGATIONS3— 27.88% | ||||||||
| Fannie Mae, Series 2000-T5, Class B, 7.30% 2010 | 500 | 526,108 | ||||||
| Fannie Mae, Series 2001-T6B, 6.088% 2011 | 250 | 257,396 | ||||||
| Fannie Mae 4.50% 2020 | 461 | 440,263 | ||||||
| Fannie Mae 6.00% 2021 | 22 | 21,749 | ||||||
Fannie Mae, Series 2001-4, Class GA, 10.267% 20251 | 31 | 34,461 | ||||||
| Fannie Mae 6.00% 2026 | 114 | 114,139 | ||||||
| Fannie Mae 6.00% 2027 | 862 | 859,290 | ||||||
| Fannie Mae 7.50% 2031 | 7 | 7,383 | ||||||
Fannie Mae, Series 2001-20, Class C, 11.96% 20311 | 27 | 29,662 | ||||||
| Fannie Mae 4.50% 2036 | 149 | 135,663 | ||||||
| Fannie Mae 5.50% 2036 | 419 | 404,984 | ||||||
| Fannie Mae 5.50% 2037 | 149 | 142,564 | ||||||
| Fannie Mae 6.50% 2037 | 150 | 151,224 | ||||||
| Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041 | 21 | 21,326 | ||||||
| Freddie Mac 8.75% 2008 | 1 | 742 | ||||||
| Freddie Mac 4.00% 2015 | 158 | 147,791 | ||||||
| Freddie Mac 6.00% 2026 | 536 | 534,591 | ||||||
| Freddie Mac 5.00% 2035 | 221 | 207,614 | ||||||
| Freddie Mac 5.00% 2035 | 114 | 107,085 | ||||||
| Freddie Mac 5.50% 2035 | 109 | 105,803 | ||||||
| Freddie Mac, Series 3156, Class PO, principal only, 0% 2036 | 118 | 85,616 | ||||||
| Freddie Mac, Series 3257, Class PA, 5.50% 2036 | 245 | 241,117 | ||||||
| Freddie Mac, Series 3318, Class JT, 5.50% 2037 | 249 | 243,224 | ||||||
| Freddie Mac 6.00% 2037 | 250 | 247,987 | ||||||
| Freddie Mac 6.00% 2037 | 250 | 247,675 | ||||||
| Wells Fargo Mortgage-backed Securities Trust, Series 2004-2, Class A-1, 5.00% 2019 | 558 | 534,886 | ||||||
| Wells Fargo Mortgage-backed Securities Trust, Series 2003-3, Class II-A-1, 5.25% 2033 | 205 | 201,059 | ||||||
Wells Fargo Mortgage-backed Securities Trust, Series 2006-AR15, Class A-1, 5.657% 20361 | 159 | 157,133 | ||||||
SBA CMBS Trust, Series 2005-1, Class D, 6.219% 20352 | 320 | 314,325 | ||||||
SBA CMBS Trust, Series 2006-1A, Class A, 5.314% 20362 | 200 | 197,814 | ||||||
SBA CMBS Trust, Series 2006-1A, Class D, 5.852% 20362 | 300 | 291,357 | ||||||
| Countrywide Alternative Loan Trust, Series 2005-40CB, Class A-1, 5.50% 2035 | 191 | 183,739 | ||||||
| Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-17, 6.00% 2035 | 173 | 171,652 | ||||||
Countrywide Alternative Loan Trust, Series 2005-62, Class 2-A-1, 6.029% 20351 | 131 | 130,767 | ||||||
| Countrywide Alternative Loan Trust, Series 2006-16CB, Class A-2, 6.00% 2036 | 118 | 117,359 | ||||||
| Chase Commercial Mortgage Securities Corp., Series 1998-2, Class A-2, 6.39% 2030 | 335 | 336,889 | ||||||
| Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2, 7.757% 2032 | 192 | 200,118 | ||||||
Crown Castle Towers LLC, Series 2005-1, Class A-FX, 4.643% 20352 | 200 | 195,906 | ||||||
Crown Castle Towers LLC, Series 2005-1, Class D, 5.612% 20352 | 325 | 317,146 | ||||||
GS Mortgage Securities Corp. II, Series 1998-C1, Class D, 7.103% 20301 | 250 | 253,773 | ||||||
GS Mortgage Securities Corp. II, Series 1998-C1, Class E, 7.103% 20301 | 250 | 253,722 | ||||||
| J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4, Class A-2, 4.79% 2042 | 250 | 245,429 | ||||||
| J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP1, Class A-2, 4.625% 2046 | 250 | 245,172 | ||||||
| CS First Boston Mortgage Securities Corp., Series 2004-C4, Class A-4, 4.283% 2039 | 255 | 242,918 | ||||||
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-3, 5.23% 20401 | 125 | 121,568 | ||||||
| CS First Boston Mortgage Securities Corp., Series 1998-C1, Class A-1B, 6.48% 2040 | 99 | 99,713 | ||||||
American Tower Trust I, Series 2007-1A, Class D, 5.957% 20372 | 200 | 197,340 | ||||||
American Tower Trust I, Series 2007-1A, Class E, 6.249% 20372 | 250 | 246,700 | ||||||
GMAC Mortgage Loan Trust, Series 2006-AR1, Class 2-A-1, 5.646% 20361 | 433 | 428,918 | ||||||
| Morgan Stanley Capital I, Inc., Series 1998-HF2, Class A-2, 6.48% 2030 | 348 | 349,335 | ||||||
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 20262 | 281 | 289,897 | ||||||
| Bear Stearns Commercial Mortgage Securities Inc., Series 2001-TOP2, Class A-2, 6.48% 2035 | 250 | 256,911 | ||||||
| Wells Fargo Alternative Loan Trust, Series 2007-PA3, Class IV-A-1, 6.50% 2037 | 249 | 250,726 | ||||||
| Triad Automobile Receivables Trust, Series 2006-C, Class A-3, AMBAC insured, 5.26% 2011 | 250 | 249,922 | ||||||
| Wachovia Bank Commercial Mortgage Trust, Series 2005-C17, Class A-2, 4.782% 2042 | 250 | 246,285 | ||||||
| PG&E Energy Recovery Funding LLC, Series 2005-1, Class A-3, 4.14% 2012 | 250 | 245,143 | ||||||
ARG Funding Corp., Series 2005-1, Class A-3, MBIA insured, 4.29% 20112 | 250 | 244,753 | ||||||
| Capital One Multi-asset Execution Trust, Series 2006-10, Class A, 5.15% 2014 | 235 | 234,375 | ||||||
| UPFC Auto Receivables Trust, Series 2005-B, Class A-3, XLCA insured, 4.98% 2011 | 233 | 232,536 | ||||||
| Morgan Stanley Dean Witter Capital I Trust, Series 2001-TOP5, Class A-3, 6.16% 2035 | 216 | 217,417 | ||||||
Residential Funding Mortgage Securities II, Inc., Series 2007-HSA2, Class A-1F, MBIA insured, 8.47% 20371 | 221 | 216,567 | ||||||
| Chase Mortgage Finance Trust, Series 2003-S9, Class A-1, 5.00% 2018 | 226 | 216,415 | ||||||
Lehman Mortgage Trust, Series 2007-6, Class 2-A1, 6.946% 20371 | 208 | 209,952 | ||||||
| Residential Funding Mortgage Securities I, Inc., Series 2004-S9, Class II-A-1, 4.75% 2019 | 217 | 207,392 | ||||||
| IndyMac IMSC Mortgage Loan Trust, Series 2007-F3, Class 3-A-1, 7.00% 2037 | 200 | 202,376 | ||||||
| Long Beach Acceptance Auto Receivables Trust, Series 2006-B, Class A-4, FSA insured, 5.18% 2013 | 200 | 200,164 | ||||||
Susquehanna Auto Lease Trust, Series 2007-1, Class A-3, 5.25% 20102 | 150 | 150,216 | ||||||
| AmeriCredit Automobile Receivables Trust, Series 2006-B-G, Class A-4, FGIC insured, 5.21% 2013 | 150 | 150,070 | ||||||
WaMu Mortgage Pass-Through Certificates Trust, Series 2005-AR15, Class A-1-A, 5.58% 20451 | 132 | 131,751 | ||||||
| LB-UBS Commercial Mortgage Trust, Series 2000-C3, Class A-2, 7.95% 2025 | 124 | 130,449 | ||||||
| Chase Manhattan Bank — First Union National Bank, Commercial Mortgage Trust, Series 1999-1, Class B, 7.619% 2031 | 125 | 129,761 | ||||||
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2005-2, Class A-6, AMBAC insured, 5.08% 20112 | 125 | 124,255 | ||||||
| Residential Accredit Loans, Inc., Series 2003-QS14, Class A-1, 5.00% 2018 | 128 | 122,297 | ||||||
| DLJ Commercial Mortgage Corp., Series 1999-CG1, Class A-1B, 6.46% 2032 | 118 | 119,251 | ||||||
| Vanderbilt Mortgage and Finance, Inc., Series 2001-A, Class B-1, 8.20% 2020 | 99 | 100,890 | ||||||
Washington Mutual Mortgage, WMALT Series 2005-AR1, Class A-1-A, 5.58% 20351 | 90 | 90,367 | ||||||
HarborView Mortgage Loan Trust, Series 2005-15, Class 2-A1A2, 6.12% 20451 | 83 | 83,452 | ||||||
Cendant Timeshare Receivables Funding, LLC, Series 2005-1, Class A-1, FGIC insured, 4.67% 20172 | 81 | 79,681 | ||||||
Morgan Stanley Mortgage Loan Trust, Series 2004-3, Class 4-A, 5.683% 20341 | 75 | 72,589 | ||||||
| Government National Mortgage Assn. 8.50% 2008 | 1 | 1,306 | ||||||
| Government National Mortgage Assn. 10.00% 2020 | 41 | 45,946 | ||||||
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.515% 20271,2 | 39 | 38,582 | ||||||
| Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-2, 6.226% 2035 | 36 | 35,809 | ||||||
Residential Asset Securities Corp. Trust, Series 2004-KS12, Class A-1-2, 5.55% 20351 | 2 | 1,694 | ||||||
16,679,392 | ||||||||
U.S. GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES — 15.45% | ||||||||
| U.S. Treasury 4.50% 2011 | 465 | 463,438 | ||||||
| U.S. Treasury 4.25% 2013 | 4,000 | 3,919,680 | ||||||
| U.S. Treasury 12.50% 2014 | 1,200 | 1,381,596 | ||||||
| U.S. Treasury 11.25% 2015 | 800 | 1,126,128 | ||||||
U.S. Treasury 4.50% 20364 | 1,490 | 1,394,312 | ||||||
| Freddie Mac 5.25% 2011 | 950 | 955,576 | ||||||
9,240,730 | ||||||||
MUNICIPALS — 0.92% | ||||||||
| Educational Enhancement Funding Corp., Tobacco Settlement Asset-backed Bonds, Series 2002-A, Class A, 6.72% 2025 | 162 | 162,518 | ||||||
| Golden State Tobacco Securitization Corp., Tobacco Settlement Asset-backed Bonds, | ||||||||
| Series 2003-A-1, 6.25% 2033 (preref. 2013) | 125 | 136,648 | ||||||
| Eastern Municipal Power Agency, Power System Revenue Refunding Bonds, Federally Taxable, Series 2003-E, 5.55% 2014 | 125 | 121,936 | ||||||
| Badger Tobacco Asset Securitization Corp., Tobacco Settlement Asset-backed Bonds, 6.125% 2027 | 85 | 88,739 | ||||||
| Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds, Series 2001-A, Class A, 6.36% 2025 | 41 | 40,784 | ||||||
550,625 | ||||||||
NON-U.S. GOVERNMENT BONDS & NOTES — 0.78% | ||||||||
| Israeli Government 7.50% 2014 | 935 | 234,959 | ||||||
| Swedish Government 12.00% 2010 | 200 | 232,809 | ||||||
467,768 | ||||||||
Total bonds & notes (cost: $50,410,637) | 50,026,600 | |||||||
| Common stocks — 0.01% | Shares | |||||||
INDUSTRIALS — 0.01% | ||||||||
Northwest Airlines Corp.5 | 293 | 5,107 | ||||||
Total common stocks (cost: $6,194) | 5,107 | |||||||
| Preferred securities — 9.07% | ||||||||
FINANCIALS — 9.07% | ||||||||
BNP U.S. Funding LLC, Series A, 7.738% noncumulative1,2 | 375,000 | 377,512 | ||||||
BNP Paribas 5.186% noncumulative1,2 | 300,000 | 281,214 | ||||||
BNP Paribas Capital Trust 9.003% noncumulative trust1,2 | 150,000 | 164,923 | ||||||
Fannie Mae, Series O, 7.495%1,2 | 15,000 | 780,938 | ||||||
Banco Santander Central Hispano, SA 6.80%2 | 10,000 | 235,630 | ||||||
Banco Santander Central Hispano, SA 6.50%2 | 10,000 | 229,380 | ||||||
HSBC Capital Funding LP, Series 1, 9.547% noncumulative step-up1,2 | 400,000 | 442,621 | ||||||
Deutsche Bank Capital Funding Trust I 7.872%1,2 | 300,000 | 313,321 | ||||||
MUFG Capital Finance 1 Ltd. 6.346% noncumulative1 | 300,000 | 288,052 | ||||||
Swire Pacific Capital Ltd. 8.84% cumulative guaranteed perpetual capital securities2 | 10,000 | 281,250 | ||||||
ING Capital Funding Trust III 8.439% noncumulative1 | 250,000 | 271,314 | ||||||
| National Bank of Canada, Series A, 8.35% exchangeable depositary shares | 10,000 | 260,300 | ||||||
Resona Preferred Global Securities (Cayman) Ltd. 7.191%1,2 | 250,000 | 252,803 | ||||||
Wachovia Capital Trust III 5.80%1 | 250,000 | 245,385 | ||||||
Shinsei Finance II (Cayman) Ltd. 7.16% noncumulative1,2 | 250,000 | 238,568 | ||||||
Chuo Mitsui Trust and Banking Co., Ltd. 5.506%1,2 | 250,000 | 234,426 | ||||||
| Freddie Mac 5.57% | 10,000 | 227,500 | ||||||
Fuji JGB Investment LLC, Series A, 9.87% noncumulative1,2 | 160,000 | 166,043 | ||||||
DBS Capital Funding Corp., Series A, 7.657% noncumulative guaranteed preference shares1,2 | 125,000 | 134,049 | ||||||
Total preferred securities (cost: $5,483,404) | 5,425,229 | |||||||
| Principal amount | ||||||||
| Short-term securities — 5.61% | (000 | ) | ||||||
Coca-Cola Co. 5.25% due 8/6/20072 | $ | 750 | 749,344 | |||||
Emerson Electric Co. 5.23% due 8/15/20072 | 600 | 598,692 | ||||||
Park Avenue Receivables Co., LLC 5.28% due 8/3/20072 | 550 | 549,758 | ||||||
Honeywell International Inc. 5.28% due 8/10/20072 | 510 | 509,252 | ||||||
Wal-Mart Stores Inc. 5.20% due 8/1/20072 | 500 | 499,927 | ||||||
| Prudential Funding, LLC 5.30% due 8/15/2007 | 450 | 449,006 | ||||||
Total short-term securities (cost: $3,355,979) | 3,355,979 | |||||||
Total investment securities (cost: $59,256,214) | 58,812,915 | |||||||
Other assets less liabilities | 1,001,853 | |||||||
Net assets | $ | 59,814,768 | ||||||
1 | Coupon rate may change periodically. |
2 | Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. In practice, restricted securities in this fund are typically as liquid as unrestricted securities. The total value of all such restricted securities was $17,046,950, which represented 28.50% of the net assets of the fund. |
3 | Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date. |
4 | This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future. |
5 | Security did not produce income during the last 12 months. |
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so you may lose money.
Investors should carefully consider the investment objectives, risks, and expenses of the funds. This and other important information is contained in the funds’ prospectus, which should be read carefully before investing.
MFGEFP-985-0907O-S10921
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INVESTMENT PORTFOLIO
To the Shareholders and Board of Trustees of Endowments:
We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of Endowments (the “Trust”), comprising the Growth and Income and Bond Portfolios, as of July 31, 2007, and for the year then ended and have issued our report thereon dated September 7, 2007, which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR. Our audits also included the Trust’s investment portfolios (the “Schedules”) as of July 31, 2007, appearing in Item 6 of this Form N-CSR. This Schedule is the responsibility of the Trust’s management. Our responsibility is to express an opinion based on our audit. In our opinion, the Schedules referred to above, when considered in relation to the basic financial statements taken as a whole of the Trust referred to above, presents fairly, in all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
Costa Mesa, California
September 7, 2007
ITEM 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 8 – Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 10 – Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of trustees since the Registrant last submitted a proxy statement to its shareholders. The procedures are as follows. The Registrant has a committee on governance comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. The committee periodically reviews such issues as the board’s composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full board of trustees. While the committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the board. Such suggestions must be sent in writing to the committee on governance of the Registrant, c/o the Registrant’s Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the committee on governance.
ITEM 11 – Controls and Procedures
| (a) | The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule. |
| (b) | There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
ITEM 12 – Exhibits
| (a)(1) | The Code of Ethics that is the subject of the disclosure required by Item 2 is attached as an exhibit hereto. |
| (a)(2) | The certifications required by Rule 30a-2 of the Investment Company Act of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ENDOWMENTS | |
By /s/ Robert G. O'Donnell | |
Robert G. O'Donnell, Vice Chairman and Principal Executive Officer | |
| Date: October 3, 2007 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By /s/ Robert G. O'Donnell |
Robert G. O'Donnell, Vice Chairman and Principal Executive Officer |
| Date: October 3, 2007 |
By /s/ Dori Laskin |
Dori Laskin, Treasurer and Principal Financial Officer |
| Date: October 3, 2007 |